On December 12th, 1961, the S&P 500 hit a near-term high; 196 days later, on June 26th, the S&P 500 bottomed down 28%. The market rallied through the Summer, rising 13% into August. Then the market traded down 10% into late October before staging a fourth-quarter rally, gaining 18% into year-end.
You may not know who Arthur Burns was or why you should care, but in economic circles, his name is well known as the Federal Reserve Chairman, whose monetary policy missteps were responsible for or contributed to Stagflation and the Great Inflation of the seventies, which later led to a deep recession in the early eighties.
A look at the historical market returns following mid-term elections.
People experience the economy differently. Some people's economies are in recession while others are not, and the data is mixed.
The data suggests we are in a bear market and mild recession. During a recession, the average drawdown for the S&P 500 is 30%; so far, we’re down 20%, making another leg down a reasonable expectation, but we can’t know that for sure.
The first half of the year has been volatile as expected. The S&P 500 was down 20.58% during the first six months of this year. Looking at previous times when the S&P 500 has been down 20% or more over two consecutive quarters, the S&P 500 had double-digit returns over the following 12 months 100% of the time, averaging a gain of 31.36%. Past performance doesn't guarantee future returns, and we may not have seen the lows for 2022, but if the S&P 500 follows historical patterns, markets may be significantly higher next summer.