Ken Fisher: This Stock Trend Has Global Ripple Effects
Ken Fisher explains the 'midterm miracle' pattern where U.S. stocks struggle in the first three quarters of midterm election years due to political rhetoric, but historically rise 88% of the time in Q4 with ~7% average returns. This pattern significantly correlates with international markets, though not perfectly.
Summary
Ken Fisher discusses the historical 'midterm miracle' phenomenon in U.S. stock markets during midterm election years. He explains that the first three quarters typically show grinding, sideways movement as politicians engage in extremist rhetoric to appeal to their bases during primaries, creating fear that dampens stock performance. During this period, stocks have risen only slightly more than half the time over the past century. However, the fourth quarter shows dramatically different results, with stocks rising 88% of the time and averaging approximately 7% returns. Fisher addresses whether this pattern affects international markets, explaining that while the correlation isn't perfect, it is significant. He notes that correlations between the S&P 500 and comparable international indexes tend to be over 0.5 for most developed markets, and in the high 80s for the overall market outside the United States. This means positive movements in U.S. stocks during the midterm miracle period tend to ripple out to international markets, though with varying degrees of correlation depending on the specific market and development level.
About this episode
Watch full length video here: https://youtu.be/vdUR6WfRgeI To make sure you never miss an update, subscribe to our channel: https://www.youtube.com/@fisherinvestments?sub_confirmation=1. For more of Ken Fisher's thoughts on the markets, visit us at https://www.fisherinvestments.com. Connect with Fisher Investments on: • Facebook - https://www.facebook.com/FisherInvestments • X - https://twitter.com/fisherinvest • LinkedIn - https://www.linkedin.com/company/fisher-investments • Instagram - https://www.instagram.com/fisher.investments • TikTok - https://www.tiktok.com/@fisher_investments You can also follow Ken Fisher here: • Facebook - https://www.facebook.com/KenFisher.FisherInvestments • X - https://twitter.com/KennethLFisher • LinkedIn - https://www.linkedin.com/in/ken-fisher/ • Instagram - https://www.instagram.com/kenfisher_fisherinvestments/ Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice.
Key Insights
- The fourth quarter of U.S. midterm election years presents a historically strong investment opportunity, with stocks rising 88% of the time and averaging 7% returns, compared to mediocre performance in the first three quarters
- International investors can benefit from U.S. midterm patterns since most developed foreign markets have correlations above 0.5 with the S&P 500, meaning positive U.S. fourth quarter performance typically ripples globally
Topics
Transcript
So over many years I've written about the midterm miracle. When we've historically had midterm election year in the United States, the first three quarters of the year in America tend to be a little bit grinding and sideways as politicians running for office in both parties screech extremist rhetoric to their bases jockeying for position in party primaries in the first part of the year. And that extreme rhetoric tends to be frightening to people. And that fright tends to ripple over into political fear associated with stocks, which tends to put a volatile damper on US returns in the first three quarters of the year. The first three quarters of the year in midterm election years over the…
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