Your stock portfolio is these days looking quite a bit beefier due to the “midterm miracle.”
Now, let’s top it off with some “gridlock gravy.”
Last fall, I told you stocks were poised for a serious bull run.
I noted that – from one Congress to a different throughout US history – the nine months starting Oct. 1 before midterm elections have consistently been probably the most profitable nine-month periods for stocks since 1925.
Chances are you’ll also recall that my forecast wasn’t a majority opinion.
As an alternative, we got rampant doom-and-gloom over inflation, rate hikes and recession fears.
So what happened in the tip? We saw stellar S&P 500 gains through June 30, with a 25.7% rise that topped the 19.5% historical mid-term miracle average and put an end to 2022’s bear market.
What now? Expect more bearish hand-wringing – and more gains.
Stocks often rise in the back half of presidents’ third years, albeit less strongly.
![Presidential term stock chart aftermath.](https://nypost.com/wp-content/uploads/sites/2/2023/08/Potential-NYP-Slides-7.18.pptx-2.jpg?w=960)
US stocks were positive in 75% of them. The last negative full third yr of any president’s term: 1939’s 0.9% slip during WWII’s eruption.
On that note, investors can expect plenty more headlines on Ukraine – that Ukraine is getting drained, that America is getting bored with sending it weapons – or worse, running out.
But this war won’t stop stocks, because it didn’t after its initial blip.
Regional wars never topple stocks for long, and never have. Only world wars do that.
![Traders on the floor of the New York Stock Exchange.](https://nypost.com/wp-content/uploads/sites/2/2023/08/NYPICHPDPICT000018983081.jpg?w=1024)
Back home, because the consensus grows that we’re not headed for a recession, in spite of everything (again – a minority opinion last fall that you read here), brace for alarm bells about persistent inflation, and how it would need a more dire response from the Fed — or scarier, tax hikes.
The truth: inflation doesn’t come from excessive economic strength or from government spending, but relatively from excess money creation.
The latter has been in hand for quite a while now – and inflation is coming down.
As for the 2024 election, there is loads of fear about Biden and about Trump.
Nevertheless it’s value noting that in every election, we get a winner.
Whether it’s preposterous or not, whoever wins we’ll like greater than we did before.
Election jitters will fade to a bullish tailwind.
(One other bit of fine news: Over 83% of presidents’ fourth years – like 2024 – have been positive, averaging 11.4%.)
![Presidential term stock chart anomalies.](https://nypost.com/wp-content/uploads/sites/2/2023/08/Potential-NYP-Slides-7.18.pptx-1.jpg?w=960)
![Presidential term stock chart.](https://nypost.com/wp-content/uploads/sites/2/2023/08/Potential-NYP-Slides-8.4.jpg?w=1024)
Which brings us to our secret sauce in the back half of any given administration: gridlock.
The legislative quiet that follows midterms – whether it’s the president’s enemies who’ve regained control of Congress, or it’s Congress getting split between two parties – zaps uncertainty around latest, controversial laws that all the time create winners and losers.
Political squawking stays, but big bills go nowhere. Political risk aversion falls, juicing stocks.
Further, most presidents shun major laws as re-election bids near, lest they irk large swaths of voters.
They use unaddressed issues as fundraising bait and campaign guarantees. Get me re-elected – then I’ll fix it! Politics 101.
Hence, after two years of mega-spending bills, this yr features mainly social and foreign policy chatter.
Cluster munitions, NATO negotiations, student loan plans and replans, SCOTUS hype. Vital? Possibly. Headline fodder? Yes. But nothing to rattle markets. Pundits shriek. Markets shrug.
![Stock markets and presidential cycles.](https://nypost.com/wp-content/uploads/sites/2/2023/08/Potential-NYP-Slides-7.18.pptx.jpg?w=960)
It also looks just like the 2024 Senate election is tilted toward Republicans.
The GOP currently only has two barely vulnerable seats – Ted Cruz in Texas and Florida’s Rick Scott.
Meanwhile, Republicans look poised to flip seats held by Democrats in West Virginia, Montana, and very possibly Ohio.
Democrats have five more relatively vulnerable seats.
So, the GOP almost surely wins the Senate no matter who wins the White House. That also will construct business enthusiasm as November approaches.
Perhaps political risk isn’t your go-to source for anxiety.
Take a look at industrial real estate. Working from home, rates of interest and excess capability are adding as much as a spectacular bust.
It is perhaps a Important Street worry, but not for stocks. This story has cried wolf too again and again.
![US Capitol building](https://nypost.com/wp-content/uploads/sites/2/2023/08/NYPICHPDPICT000019030814.jpg?w=1024)
Old stories that we all know too well lose their market mojo. You possibly can bet on that, all the time.
Actually, business is upbeat as recession fears ebb, and that augurs for a shift away from the bounceback categories I’ve favored since last fall – big, high-quality growth names, tech or otherwise – toward more traditional industrial and economically sensitive names.
Still, the wall of worry bull markets legendarily climb won’t disappear (see above) and that’s a great thing.
And as inflation wanes slowly but surely, and as slow growth defies recession fears, gridlock also will help keep us in positive territory well into 2024.
Take that to your congressman if you happen to like – and be certain that you’re taking it to the bank.
Ken Fisher is the founder and executive chairman of Fisher Investments, a four-time Latest York Times bestselling creator, and regular columnist in 17 countries globally.