AI Summary
This video analyzes 98 years of stock market data to reveal how the four-year U.S. presidential election cycle affects S&P 500 returns. The presenter identifies the pre-election year as the strongest period and the midterm year as the weakest, while stressing that historical patterns are probabilities, not guarantees.
Chapters
The video sets out to answer how midterm elections affect stock markets, using 2026 as the current midterm year and comparing it to the rest of the four-year presidential cycle.
Starting from the 2024 presidential election: 2025 is post-election, 2026 is midterm, 2027 is pre-election, and 2028 is the next presidential election. The analysis uses 98 years of historical data, going back to the 90 index that preceded the S&P 500.
For the pre-election year (2027), the average return is 17.8% and the median return is 22.5%, with the market rising 91.7% of the time. This makes it the standout year in the cycle.
The election year (2028) also shows favorable odds: median return of 15.9% and an 84% chance of finishing positive.
Over the past 98 years, the stock market has ended positive in 72 of 98 years, meaning any given year has a 73.5% chance of a gain. This baseline is used to compare election-cycle years.
In midterm years (like 2026), the average return drops to 7.1%, the median to 5%, and the probability of a positive year falls to 58.3%—well below the 73.5% baseline.
Among the past 24 pre-election years, the market finished down only twice: in 1931 during the Great Depression and in 1939 when World War II began in Europe.
Politicians want a strong economy heading into elections, so they tend to implement expansionary fiscal policies and increase government spending. The Federal Reserve also tends to support with looser monetary policy, despite its theoretical independence.
Historical averages don't guarantee future results; the sample is only about 24 four-year cycles; and black swan events like crises, wars, and pandemics can override the pattern.
With high historical odds pointing to strong 2027 and 2028 returns, the presenter advises viewers to get invested and position themselves now to avoid missing the upswing.
Mentioned in this Video
Study Flashcards (8)
What is the average return of the S&P 500 in a pre-election year over the past 98 years?
easy
Click to reveal answer
What is the average return of the S&P 500 in a pre-election year over the past 98 years?
17.8%
01:29
What is the median return in a pre-election year?
easy
Click to reveal answer
What is the median return in a pre-election year?
22.5%
01:29
What percentage of pre-election years ended positive in the data set?
easy
Click to reveal answer
What percentage of pre-election years ended positive in the data set?
91.7%
01:46
What is the historical probability of the stock market rising in any given year?
easy
Click to reveal answer
What is the historical probability of the stock market rising in any given year?
73.5%
04:17
Which year of the presidential cycle is historically the worst for stocks?
medium
Click to reveal answer
Which year of the presidential cycle is historically the worst for stocks?
The midterm year (e.g., 2026)
05:00
Which two pre-election years finished down in the data set?
hard
Click to reveal answer
Which two pre-election years finished down in the data set?
1931 (Great Depression) and 1939 (start of World War II)
05:53
Why do pre-election years tend to outperform?
medium
Click to reveal answer
Why do pre-election years tend to outperform?
Politicians implement expansionary fiscal policies and increase spending to strengthen the economy before elections, and the Fed typically supports with monetary policy.
06:22
What analogy is used to illustrate that high probability doesn't mean certainty?
easy
Click to reveal answer
What analogy is used to illustrate that high probability doesn't mean certainty?
Steph Curry's 91% free-throw shooting percentage.
08:53
💡 Key Takeaways
Pre-election year dominates the cycle
With a median return of 22.5% and a 91.7% positive-close rate, this is the single strongest pattern in the data.
01:29Midterm year is the laggard
The midterm year's 58.3% positive-close rate sits well below the 73.5% historical baseline, making it the weakest year.
05:00Political incentives drive the market
Elected officials' desire for a strong economy before elections tends to produce stimulus that boosts markets.
06:22History is a guide, not a contract
The presenter explicitly warns that only 24 cycles and unpredictable black swan events prevent this from being a law of nature.
07:30Position before the upswing
The practical takeaway is to invest now because 2027 and 2028 have historically offered the best odds.
09:33Full Transcript
[00:01] 3rd, and a lot of people have been asking me how the midterms affect the stock markets. So, in today's video, let's review how the stock market does Listen, I'm not going to waste your time. I'm not going to be like, "Oh,
[00:14] show it to you right now. But, I want to clarify a few details which are So, I want to know how the stock market performs within a 4-year time frame based on the elections. So, let's take this for example. The
[00:28] last presidential election was in 2024, right? Therefore, 2025 is the post-election year. We're currently in 2026, and this year is the midterm 3rd, 2026. And then next year, 2027, will be a
[00:45] presidential election will be on November 7th of 2028. Now, all this data which I highlighted is based off the past 98 years. So, it's not a tiny sample size. And I want to know which year within a
[01:01] 4-year election period is the best and worst for the stock market. And we're 500. And I just want to say full disclaimer, especially for the stock market nerds that are out there. The S&P 500 was
[01:14] created in 1957. So, for the prior years, we're going to go off the 90 index, which was like the S&P 500 before the S&P 500. Okay, so historically speaking, the pre-election year, which is going to be 2027, is by
[01:29] far noticeably the best year in a presidential cycle, at least for the past 98 years. The average return is 17.8% and the median return is 22.5%. And the S&P 500 goes up 91.7%
[01:46] of the time in a pre-election year. Again, which is going to be 2027, and I like those odds. So, if you want to take the long shot, an 8.3% chance that the market's going to go down in 2027, then I'll just say
[02:00] be my guest. The odds are not going to be in your favor. Now, I just want to clarify a difference between these two, the average and the median. So, it's between two. So, we all know what the average means.
[02:13] simply add up every year's return, and years, right? So, some people don't know what the median means, and that's fine. Like, we're here to learn.
[02:25] So, the problem with taking the average is that there may be a few years that essentially, we're talking about outliers, and it throws off the average. and it makes the average seem misleading. So, that makes sense, right?
[02:41] Now, moving on to the median. The median is simply you take all the results, and then you just take the middle one. So, it's very straightforward, as well. Therefore, the median is the middle observation. After you rank all the
[02:54] get the middle one. And a lot of people prefer to go off the median because if you do it this way, then it's not going to be affected by those outlier years, good or bad. And in many instances, it better answers the
[03:07] question, "What does a typical year look like?" Now, going back to this, within a 4-year presidential cycle, the best performing year is the year after the midterm elections or the year before the
[03:20] presidential election, which is going to be 2027. And 2028's most likely going to be a good year, as well. The median return is 15.9%. And I want you to take a look at these stats. A 91.7% chance that the market's
[03:34] stats. A 91.7% chance that the market's going to go up in 2027, and an 84% in 2028. Of course, it's not guaranteed that the market's going to go up in 2027 and 2028, but we're just talking about
[03:47] probabilities based off historical data. But, I I to give you some context. Now, use the same timeframe. So, we're talking about 98 years so we can compare In the past 98 years, the stock market
[04:01] has shown positive returns in 72 of those 98 years, so 26 negative years. Now, why do you think the stock market looks like this over the past 98 years? chance like a 50/50 chance that the market's going to go up or down, then
[04:17] market's going to go up or down, then you are wrong. It's designed to go up. So, there's a 73.5% chance on any given year that the market's going to go up and I want you to remember that number, 73.5% so that we can compare to these
[04:31] years within an election cycle. Okay, so as you can see the pre-election year 2027 and the election year 2028 has a higher chance of ending the year positive compared to an average year. Because the odds of a
[04:46] positive year for those years are greater than 73.5%. Now, we are in the midterm year, which is 2026 and this year is historically the worst-performing year within a presidential cycle.
[05:00] The average return of the stock market in a midterm year is 7.1%, which is worse than the annual average. The median return is only 5% and there's a 58.3% chance that the market's going to end up positive for
[05:13] the year, which is below the average of 73.5%. is an underperforming year. So, that's why I'm looking forward to 2027 and 2028
[05:26] why I'm looking forward to 2027 and 2028 because not only is there better odds of exceptional returns, but also we're currently in a not-so-good year. about 2027. There's a 91.7%
[05:39] chance that the market's going to end up positive next year. In the past 24 pre-election years, the market only ended down in two of those 24 years. So, one time was in 1931 during the
[05:53] Great Depression. The other time was in 1939 as World War began in Europe on September 1st of 1939 when the Nazis And then Britain and France they declared war September 3rd.
[06:07] So, I just wanted to share that with you so that you know, that explains those that's understandable. I get it, but every other pre-election year in the data set finished positive for the year. Okay, so clearly something's going on
[06:22] Why does the stock market do better than usual and have a higher probability of ending positive in a pre-election year, 2027? Okay, so the explanation is it's Congress want the economy and the markets to be strong heading into the
[06:37] So, that creates incentive for the politicians to implement policies that will strengthen economic activity. You know, that's usually done by increasing government spends, which is fueled by debts. And not only are the politicians
[06:51] pumping stimulated fiscal policies, but the Federal Reserve they're I mean, they do the same thing with monetary policy. But of course, yeah, I mean, you can make the argument, yeah, the Federal Reserve is supposed to be independent of
[07:03] politics. Okay, yeah, that's the concept, but that's not reality. You know, that's like saying that politicians are not supposed to be corrupt. Well, yeah, ideally, like that's the
[07:16] concept, but in reality, I mean, you know that there's rampant corruption by the politicians. I mean, let's not be naive here. Now, with all that being said, there are three major warnings that I want you to understand. The first
[07:30] thing is that these are averages based off historical data. that although this information is going to be useful, you know, and helpful in order to make a better decision, past performance does not guarantee future
[07:43] there is guarantee. The second thing is that we're working we're you know, we're using information going back to 1928, we're dealing with roughly 24 cycles cuz each cycle is 4 years.
[07:59] So, this is still useful information, but it's not big enough of a sample size to treat the cycle as like a law of nature. That's all I'm saying. presidential cycle, it doesn't override black swan events. So, what am I talking
[08:13] We're talking about the major the major events that come out of nowhere, that's unexpected, that has a major influence on the markets. We're talking about financial crises, wars, pandemics,
[08:26] And of course, those are going to be unpredictable and they're heavily going to impact the markets. So, that's my disclaimer, that's my word of caution. that nothing's guaranteed. Now, does that mean all this information that I
[08:38] just showed you is useless? And I would argue no. So, I'll explain to you like this. Any basketball fans out there? Okay, if what Steph Curry's free throw shooting percentage is? It's 91%.
[08:53] free throws. He's probably one of the all-time best, right? Now, does that mean So, 91% Does that mean he's always going to make a free throw? Like, guaranteed? And the answer is no, of course not because he he
[09:06] is no, of course not because he he shoots 91%. He doesn't shoot 100%. So, essentially, that's what it's like. If you bet that the stock market, the S&P 500 is going to go up next year, 2027, that's equivalent to you betting
[09:19] next free throw. Like, am I confident about that? Yeah, I'm very confident about that, but is it 100% confidence? And the answer is no. that's basically what it is. That's the situation. Now, to conclude, there's a
[09:33] high chance that 2027 is going to be a great year for the stock markets. You know, probably 2028 as well. So, I would say get invested, position yourself now so that you don't miss out on 2027 and 2028. And please check out
[09:47] can see what I'm investing in, you can join our private chat room, and you can to leave a link for you down below. Thank you so much. Please subscribe, and Thank you so much. Please subscribe, and I wish you a very nice day. Take care.
