Midterm elections are one of the best historic buy signals for equities – Deutsche Bank

The US midterm elections have finally arrived. Economists at Deutsche Bank highlight that the S%P 500 Index has always been higher one year after the vote.

There will be plenty of extrapolation onto the 2024 presidential election from the results

“It’s no exaggeration to say that midterm elections are one of the best historic buy signals for equities we have. In fact, in the 19 midterm elections since WWII, the S&P 500 has always been higher one year after the vote. Whether any of those cycles had to contend with the macro tsunami that's coming in the next 12 months is a moot point but it shows the underlying technicals.”

“If the Republicans do end up retaking control of either chamber in Congress (or both), the result will likely be legislative gridlock for the next two years, and we do not see any major legislation on economic policy ahead of the 2024 election in this circumstance. If there is divided government, however, one area we might see more action again is the debt ceiling, since there’s a chance that a Republican-controlled Congress use the need to raise the ceiling as leverage to get some of their policy priorities through.”

“Whatever ends up happening today, there’ll be plenty of extrapolation onto the 2024 presidential election from the results. However, it’s important to remember that 2 years is also a very long time in politics and a number of presidents have come back from very bad midterm results to win re-election.”