Historically, mid-term election years are not good for the market. Refer to chart below.
One of the possible reason for such market performance is that prior to the elections, political risks increase and uncertainties surrounding fiscal policies emerged. But once this uncertainty is removed (after November), we tend to see market pricing in this positivity post election.
This year I believe it is going to be the same as well. We should see some pick-up in the market towards the end of the year. From now till November, it should be a good time for investors to start positioning for the new year.
I am pegging my target of S&P500 to a forward PE of 18.6x (5 years average) and thus, target reduced from 5,115 (set in January 2022) to 4,411 which represents a downward revision of 13.7%.
Assuming S&P500 close the year at 4,411, the index is still down for the year 2022 (-7.4%) as the S&P500 closed at 4,766 end of 2021.
But represents an upside of 17.6% based on the closing of 3,750 last night.