Stock Market during Mid-Term Election and Inflation Analysis

14 giu 2022

This is a historic timeline showing the following:

Visuals:
1. Mid-term election years (Green Vertical Lines)
2. Peak Inflation (Yellow Vertical Lines)
3. Recession (Grey box)

Charts:
1. Inflation CPI
2. FedFundsRate
3. Unemployment Rate

You can note that there were two similar instances where inflation was getting higher during mid-term elections (1974 and 1980). In an inflationary environment, most likely the S&P bottoms when the inflation (CPI) has peaked. However, in 1980, the S&P went higher after mid-term elections despite inflation rising and having not peaked.

So the S&P can bottom anywhere from June to October (possibly at $3200- Fib lower level), then rally after mid-term elections. If post-mid-term election, the unemployment rate starts going up, it can lead to a recession in the upcoming years.

Feedback welcome!

References:
1. List of recessions: en.wikipedia.org/wiki/List_of_recessions_in_the_United_States
2. Mid-term elections: en.wikipedia.org/wiki/United_States_midterm_election
3. Stock Market post Mid-Term elections: usbank.com/investing/financial-perspectives/market-news/stock-market-performance-after-midterm-elections.html