With the 2018 midterm elections behind us, volatility continues to persist in global equities with many investors questioning whether the long-term uptrend in US stocks has reached its end. We are constructive on US equities based on strong corporate fundamentals and a supportive economic backdrop. Furthermore, if history is a guide, equities typically produce positive 12-month returns after mid-term election cycles.
Historically, fourth quarter performance has been favorable albeit not uniformly positive. The chart below (courtesy of Bloomberg TV) shows Q4 total returns of the S&P 500 going back 30 years. There have only been five negative quarters since 1988 and the overall average is 4.8% with the steepest contractions following the dot com bubble bursting and during the financial crisis.
