Why Midterm Years Can Slip Up Bull Markets – A Look At History

Bull Markets

Equities were met with tremendous success during the first year of President Trump’s term, but now we’re headed into the much more historically troublesome midterm year. As Ryan Detrick, Senior Market Strategist notes, “Midterm years tend to be a banana peel for markets, as they see the largest pullbacks out of the four-year presidential cycle. However, those who hang on for the ride tend to see a significant bounce over the next year.”

Taking a closer look, since 1950, the S&P 500 Index has been down 16.9% on average at its intra-year low during midterm years, though it tends to bounce back, posting an impressive 32.0% average gain over the subsequent twelve months.*

Now take a look at all of the midterm years and how the S&P 500 performed after the intra-year lows were made:

Bull Markets

The action over the past year has been historic on many levels, but we have our concerns as the bull market continues to move higher. In our next Weekly Market Commentary, due out later today, we will list some of the amazing streaks which make the recent market action truly special, but we will also look at a few other potential near-term worries which could trigger some long overdue volatility.

Article by LPL Research

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LPL Financial
LPL was founded with a pioneering vision: to help entrepreneurial financial advisors establish successful businesses through which they could offer truly independent financial guidance and advice. Today we provide an integrated platform of proprietary technology, brokerage, and investment advisory services to over 13,500 financial advisors as the nation’s largest independent broker/dealer,* making us a leading distributor of financial products in the United States. In addition, we support over 4,000 financial advisors with clearing services, advisory platform, and technology solutions. Even as our firm has grown over the years, we remain singularly focused on helping financial advisors to manage the complexity of their investment practices so they can better serve their clients in achieving important financial goals. And, because we do not offer proprietary products, LPL enables the independent financial advisors, banks, and credit unions with whom we partner to offer their clients truly objective, conflict-free advice. Our open-architecture platform provides our customers with access to thousands of commission, fee-based, cash, and money market products manufactured by hundreds of third-party product sponsors.

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