• Midterm Elections – What Do They Mean For Markets?

    Studying the history of stock market returns relative to midterm elections will give you a sense of how impactful they are to your own portfolio’s potential gain or loss.

    This article was written by Dimensional Fund Advisors and can be found HERE.

    It’s almost Election Day in the US once again. For those who need a brief civics refresher, every two years the full US House of Representatives and one-third of the Senate are up for reelection. While the outcomes of the elections are uncertain, one thing we can count on is that plenty of opinions and prognostications will be floated in the days to come. In financial circles, this will almost assuredly include any potential for perceived impact on markets. But should long-term investors focus on midterm elections?

    Markets Work

    We would caution investors against making short-term changes to a long-term plan to try to profit or avoid losses from changes in the political winds. For context, it is helpful to think of markets as a powerful information-processing machine. The combined impact of millions of investors placing billions of dollars’ worth of trades each day results in market prices that incorporate the aggregate expectations of those investors. This makes outguessing market prices consistently very difficult.¹ While surprises can and do happen in elections, the surprises don’t always lead to clear-cut outcomes for investors.

    The 2016 presidential election serves as a recent example of this. There were a variety of opinions about how the election would impact markets, but many articles at the time posited that stocks would fall if Trump were elected.² The day following President Trump’s win, however, the S&P 500 Index closed 1.1% higher. So even if an investor would have correctly predicted the election outcome (which was not apparent in pre-election polling), there is no guarantee that they would have predicted the correct directional move, especially given the narrative at the time.

    But what about congressional elections? For the upcoming midterms, market strategists and news outlets are still likely to offer opinions on who will win and what impact it will have on markets. However, data for the stock market going back to 1926 shows that returns in months when midterm elections took place did not tend to be that different from returns in any other month.

    Exhibit 1 shows the frequency of monthly returns (expressed in 1% increments) for the S&P 500 Index from January 1926–June 2022. Each horizontal dash represents one month, and each vertical bar shows the cumulative number of months for which returns were within a given 1% range (e.g., the tallest bar shows all months where returns were
    between 1% and 2%). The blue and red horizontal lines represent months during which a midterm election was held, with red meaning Republicans won or maintained majorities in both chambers of Congress, and blue representing the same for Democrats. Striped boxes indicate mixed control, where one party controls the House of Representatives, and the other controls the Senate, while gray boxes represent non-election months. This graphic illustrates that election month returns were well within the typical range of returns, regardless of which party won the election. Results similarly appeared random when looking at all Congressional elections (midterm and presidential) and for annual returns (both the year of the election and the year after).

    In It For The Long Haul

    While it can be easy to get distracted by month-to-month or even one-year returns, what really matters for long-term investors is how their wealth grows over longer periods of time. Exhibit 2 shows the hypothetical growth of wealth for an investor who put $1 in the S&P 500 Index in January 1926. Again, the chart lays out party control of Congress over
    time. And again, both parties have periods of significant growth and significant declines during their time of majority rule. However, there does not appear to be a pattern of stronger returns when any specific party is in control of Congress, or when there is mixed control for that matter. Markets have historically continued to provide returns over the long run irrespective of (and perhaps for those who are tired of hearing political ads, even in spite of) which party is in power at any given time.

    Equity markets can help investors grow their assets, and we believe investing is a long-term endeavor. Trying to make investment decisions based on the outcome of elections is unlikely to result in reliable excess returns for investors. At best, any positive outcome based on such a strategy will likely be the result of random luck. At worst, it can lead to
    costly mistakes. Accordingly, there is a strong case for investors to rely on patience and portfolio structure, rather than trying to outguess the market, to pursue investment returns.


    1. This is known as the efficient market theory, which postulates that market prices reflect the knowledge and expectations of all investors and that any new development is instantaneously priced into a security.
    2. Examples include: “A Trump win would sink stocks. What about Clinton?” CNN Money, 10/4/16, “What do financial markets think of the 2016 election?” Brookings Institution, 10/21/16, “What Happens to the Markets if Donald Trump Wins?” New York Times, 10/31/16.

    In USD. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of
    an actual portfolio. Past performance is not a guarantee of future results. Diversification does not eliminate the risk of market loss.


    There is no guarantee investment strategies will be successful. Investing involves risks, including possible loss of principal. Investors should
    talk to their financial advisor prior to making any investment decision. There is always the risk that an investor may lose money. A long-term
    investment approach cannot guarantee a profit.


    All expressions of opinion are subject to change. This information is intended for educational purposes, and it is not to be construed as an
    offer, solicitation, recommendation, or endorsement of any particular security, products, or services.


    Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

  • 5 Things You Need To Know To Ride Out A Volatile Stock Market

    This article, written by Franklin Distributors, LLC, provides great insight on how to approach today’s investment environment.

    1. Watching from the sidelines may cost you

    When markets become volatile, a lot of people try to guess when stocks will bottom out. In the meantime, they often park their investments in cash. But just as many investors are slow to recognize a retreating stock market, many also fail to see an upward trend in the market until after they have missed opportunities for gains. Missing out on these opportunities can take a big bite out of your returns. Consider that on average, for the 12 months following the end of a bear market, a fully invested stock portfolio had an average total return of 38.3%. However, if an investor missed the first six months of the recovery by holding cash, their return would have been only 8.0%¹. The chart below is a hypothetical illustration showing the risk of trying to time the market. By missing just a few of the stock market’s best single-day advances, you could put a real crimp in your potential returns.

    2. Dollar-cost averaging makes it easier to cope with volatility

    Most people are quick to agree that volatile markets may present buying opportunities for investors with a long-term horizon. But mustering the discipline to make purchases during a volatile market can be difficult. You can’t help wondering, “Is this really the right time to buy?”

    Dollar-cost averaging can help reduce anxiety about the investment process. Simply put, dollar-cost averaging is committing a fixed amount of money at regular intervals to an investment. You buy more shares when prices are low and fewer shares when prices are high. And over time, your average cost per share may be less than the average price per share. Dollar-cost averaging involves a continuous, disciplined investment in fund shares, regardless of fluctuating price levels. Investors should consider their financial ability to continue purchases through periods of low price levels or changing economic conditions. Such a plan does not guarantee a profit or eliminate risk, nor does it protect against loss in a declining market.

    3. Now may be a great time for a portfolio checkup

    Is your portfolio as diversified as you think it is? Meet with your financial professional to find out. Your portfolio’s weightings in different asset classes may shift over time as one investment performs better or worse than another. Together with your financial professional, you can re-examine your portfolio to see if you are properly diversified. You can also determine whether your current portfolio mix is still a suitable match with your goals and risk tolerance.

    4. Tune out the noise and gain a longer-term perspective

    Numerous television stations, websites and social media channels are dedicated to reporting investment news 24 hours a day, seven days a week. What’s more, there are almost too many financial publications to count. While the media provides a valuable service, they typically offer a very short-term outlook. To put your own investment plan in a longer-term perspective and bolster your confidence, you may want to look at how different types of portfolios have performed over time.

    1. Source: © 2022 Morningstar, Inc., 12/31/21. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance does not guarantee future results. Stock investments are represented by equal investments in the S&P 500 Index, Russell 2000® Index, and MSCI EAFE Index, representing large U.S. stocks, small U.S. stocks, and foreign stocks, respectively. Bonds are represented by the Bloomberg Barclays U.S. Aggregate Index. Cash equivalents are represented by the FTSE 3-Month U.S. Treasury Bill Index. Portfolios are rebalanced annually. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.

    5. Believe your beliefs and doubt your doubts

    There are no real secrets to managing volatility. Most investors already know that the best way to navigate a choppy market is to have a good long-term plan and a well-diversified portfolio. But sticking to these fundamental beliefs is sometimes easier said than done. When put to the test, you sometimes begin doubting your beliefs and believing your
    doubts, which can lead to short-term moves that divert you from your long-term goals.

    To keep a balance perspective, we recommend that you contact your financial professional before making any changes to your portfolio.

  • Elon Musk’s Twitter Takeover

    It has been a busy month for the richest man in the world, Elon Musk. The CEO of SpaceX and Tesla, Inc. has an estimated net worth of around $252 billion and a penchant for free speech, specifically on social media. A Twitter user since June 2010, Musk has faced some controversy through his choice of Tweets over the years. In August 2018, he claimed in a tweet that he was taking Tesla private at $420 per share. The SEC fined Musk and Tesla $20 million each, concluding that the tweets had no basis in fact and hurt investors.

    This time around, Musk moved more deliberately and was almost compliant in his quest to acquire Twitter for $44 billion and take it private.

    For Twitter shareholders, they will receive $54.20 per share in cash once the deal meets regulatory approval and other closing considerations. Even if you don’t hold Twitter stock, the changes Musk could bring to Twitter may impact how other social media and tech companies operate, like Facebook or Apple. As a private company, Twitter won’t have to report their financials in the same way as other competing companies, which means less transparency overall in the space. The following article outlines how exactly we got here in such a short time frame:

    Click to Read Article