Ken Fisher: ‘The stock markets will celebrate the mid-term elections’
The political deadlock is holding up the passing of controversial laws: the political parties celebrate when major bills come to nothing.
The mid-term elections in the United States are set to bring about an unexpected miracle on the stock markets. Historically, these elections mark the start of the most consistently positive nine-month period in the history of the US stock market; this also has a favourable impact on Italia and beyond.
In my bullish forecasts for 2026, I touched upon the magic of the mid-term elections, the outcome of which, in most cases, exacerbates political deadlock and blocks the passing of controversial legislation. Presidents are aware that they will lose power in Congress during mid-term elections. Therefore, even though few people realise it, they strive to get their most ambitious and divisive bills passed during the first two years of their term. When uncertainty rises, share prices tend to suffer.
The second year of a presidential term (such as 2026) marks the start of the mid-term election campaign. Generally speaking, extremist rhetoric spooks the stock markets. Analysing data from the last century, in the first three calendar quarters of mid-term election years, US shares rose in only 46 per cent, 58 per cent and 60 per cent of these periods, respectively.
Then, however, the mid-term elections take place in November, in which the President’s party has lost seats in the House of Representatives and the Senate in 89 per cent and 71 per cent of cases respectively. The stock markets celebrate when major bills fall through. In fact, in mid-term election years, US shares have risen 84 per cent of the time in the fourth quarter and in 92 per cent of cases in the nine-month period following the mid-terms, gaining an average of a staggering 20 per cent. This is the most consistently positive nine-month period in the entire history of the stock market, with only one negative performance, which occurred during the Great Depression. It does not matter which party is in power, nor does it matter how the market performed before the election.
This phenomenon is driving the performance of stock markets worldwide. US and non-US shares have a correlation of 0.83 — a high figure, given that 1.00 indicates a parallel movement in the same direction and -1.00 an opposite movement. The MIB and S&P 500 indices also show a strong correlation of 0.70. Therefore, what benefits the US also benefits the Milan Stock Exchange.
