What to Watch as Midterm Races Enter October
Ken Fisher analyzes the 2022 midterm elections, examining House and Senate races with focus on polling trends in September as predictive indicators. He also discusses the historical pattern of strong stock market performance during the nine months following midterm elections, termed the 'Midterm Miracle.'
Summary
Ken Fisher provides an analysis of the midterm election landscape as campaigns enter October. He begins by establishing that the direction of polling and momentum in the month following Labor Day tends to continue through Election Day in November.
For the House of Representatives, Fisher notes Republicans have a narrow two-seat advantage but face headwinds from gas prices and inflation concerns, while benefiting from superior fundraising compared to Democrats—a reversal of typical patterns. He emphasizes that redistricting over 30 years has reduced competitive districts to approximately 25, limiting potential seat swings. Despite overall challenges, Democrats have the advantage of President Trump's low favorability ratings around 39%, though district-level ratings matter more than national figures.
Regarding the Senate, Fisher identifies only seven competitive states out of 35 with elections. He discusses specific races: North Carolina as likely Democratic pickup, New Hampshire as potential Republican opportunity, Maine with Susan Collins as a perpetual toss-up, Iowa likely remaining Republican, Ohio as difficult for both sides with Sherrod Brown facing new competition, Texas as contentious, Michigan as an open seat leaning Democratic but vulnerable, and Alaska with its unusual ranked-choice voting system creating unpredictability.
Fisher concludes with his signature observation about the 'Midterm Miracle'—the nine-month period beginning October 1st in midterm years historically being the most consistently profitable period in stock market history, positive 84-95% of the time depending on the quarter, and 100% positive globally. He attributes this to fear-driven volatility before elections that resolves as certainty approaches, reducing political risk aversion. He notes this third-year presidential pattern has not been negative since 1939.
Key Insights
- The direction of polling momentum during the 30 days after Labor Day tends to continue through Election Day, and whoever is gaining in September tends to keep gaining toward November regardless of ultimate victory
- Redistricting over the last 30 years has systematically reduced competitive congressional districts to approximately 25 seats that can actually swing in either direction
- Republicans have a significant financial advantage in this midterm cycle compared to Democrats, which is unusual since Democrats have historically had superior fundraising
- The nine-month period beginning October 1st in midterm years represents the most consistently profitable stretch in U.S. and global stock market history, with quarterly positive returns of 84%, 95%, and 89% respectively
- The S&P 500 has not experienced a negative year in the third year of a presidential term since 1939, establishing what Fisher calls the 'Midterm Miracle' pattern
Topics
Transcript
[0:03] As I'm speaking to you, we're in the middle-ish part of September. Midterm campaigns get a lot of "yak yak" during the summer and spring and all like that. But the real campaigning goes full gonzo, starting with the beginning of the week after Labor Day. And so we've started that. There's an old rule that's not perfectly true, but when it comes to the midterms, it tends to be true, [0:33] which is that the direction of things during September, in that month after Labor Day, the direction of things in that thirty days, kind of month after Labor Day, tends to want to continue as the direction of things through the election first week of November. So…
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