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4 years ago

Midterm Elections Mean Uncertainty And Volatility For The Stock Market

Investing.com
Investing.com
Investing.com - The stock market has been buffeted by a number of forces this year and there's one more lurking out there that's likely to play more of a role in the coming months--the midterm elections.In a note to clients, Goldman Sachs (NYSE:GS) warned that the midterms would be another source of volatility, and "one reason to expect that current elevated levels of uncertainty persist in the coming months." Wells Fargo (NYSE:WFC)'s Investment Institute analyzed the market's performance before and after midterms dating back to 1913, and the results are certainly volatile.On average, the Dow Jones Industrial Average has fallen 20.4% from its post-election year high to its midterm election year low. Based on the 2017 high of 24,876, the 2018 low would be 19,801, which is 5,000 points below the Dow's current level.The typical rebound, however, is even more dramatic. The Dow's average gain has been 47.4% from the midterm year low to its high the following year. Based on a hypothetical 2018 low of 19,801, the 2019 high would be 28,886. which is some 2000 points above the Dow's January high.Put together, that's an enormous price swing.