Personal Wealth Management / Expert Commentary

Fisher Investments’ Founder, Ken Fisher, Provides an Update on the “Midterm Miracle”

Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher provides investors an update on what he refers to as the “Midterm Miracle”—the three calendar quarters beginning October 1st of a US midterm election year. Ken says this nine month period has a high frequency of positivity and is one of the most profitable spans in stock market history. The current iteration of the Midterm Miracle, which started October of 2022, is closely tracking historical averages.

According to Ken, the stock market favors not one political party or another, but the gridlock that occurs when the legislative and executive branches are controlled by different parties. With a Democratic president and a split Congress following the 2022 midterm election cycle, legislation is destined to be watered-down—bullish for markets that thrive on predictability. This gridlock, Ken says, should continue to serve as a tailwind for a market recovery.


Title screen appears, “Fisher Investments’ Founder, Ken Fisher, Provides an Update on the “Midterm Miracle””


[No music]


A man appears on the screen Wearing A navy suit, sitting in a office with a view of a thick forest behind him from the window.

He begins to speak.

A banner identifies him as Ken Fisher, Executive Chairmen and Co-Chief Investment Officer, Fisher Investments.

Ken Fisher doing hand gestures time to time explaining.


Ken Fisher: In middle of last year, you know, I was raving and ranting as I often rave and rant, about the midterm miracle. People never believe the midterm miracle.

The midterm miracle happens every other two years in America as we have midterm elections.

It is simply a fact that the nine months that begin October 1st of a midterm election year, three quarters, the nine months that

begin October 1st midterm election year, most profitable nine months in all of stock market history. It's just a simple measurable fact. 20% average annual returns, 20% total returns excuse me, over that nine months and 92% positivity. That just blows the lights out of anything else.

People don't believe that it works. It works because it creates, midterms create relative or absolute gridlock, and the market starts pricing

that a little before the elections.

It works because nobody ever believes that it'll work. It works because midterms create relative gridlock or absolute gridlock, and people don't really get the benefit of that because what most people think is, it's my way or the highway ideologically. What I believe is good, what you believe that disagrees with that is wrong. If we don't get what I want, things aren't going to be good.

If we get what you want, oh boy, things would be terrible.

And the fact of the matter is, our ideological beliefs in things political are so strong and overwhelming for so much of our society that they can't quite believe the notion that one of us wins, one of us loses, in that offset. If you win and I lose, or I win and you lose, the one that loses hates it a lot more than the one that wins likes it.

Behavioural finance learned a long, long time ago, I think about 35 years ago, through work of Richard Thaler and Shlomo Bernartzi, that the average American hates losses two-and-a-half times as much as they like gains.

Mier Statman and I then went back using British and German data and replicated the Thaler/Bernartzi methodology in those countries and found British investors hate losses four times as much as they love gains. Germans six times as much.

The fact of that matter is people

hate losses more than they like gains. Some culture is a little more, some culture is a little less. But in politics, we take from you to give to me, or take from me to give to you, and we do it in public, so everybody else says, oh my gosh, they might come to get me next.

And in American political history, all material big controversial legislation, all big tax changes, property rights changes, wealth transfers. The big ones, the controversial ones, all come in the first two years of president's terms because presidents know when they get elected, presidents, you may love them, you may hate them, but they know a lot about how to get elected or they never get elected president—it's not that easy to do. They know that their party tends to lose relative power in the midterms. There's almost no exceptions to that. So therefore, they know, because they know that, that the most onerous legislation they would ever get to they got to get done in the first two years. They can't get it done later.

All that legislation, if you remember, in 2021 and 2022, we had quite a lot of that. Things like the infrastructure bill, things like the so-called inflation reduction act, on and on and on, trillions of dollars. That all happens in the first two years of president's terms. Midterms make it go away.

And in the back half, mostly what happens is a lot of talk and baby kissing, and that aimed at the next elections, the baby kissing, and the talk aimed at fundraising for the next elections.

The point that I'm wanting you to

see is, the midterm miracle works. This time it worked almost picture perfect.

The average first quarter since 1925 of midterm miracles is 6.4% on the S&P 500. Third quarter of last year, the first quarter of the midterm miracle, was 7.5%. Second quarter, 6.5% average, 7.4% second quarter in reality. It's almost picture perfect and as I speak to you today, in the third week of April, we are right on the exact long term average of the midterm miracle going back to 1925.

I just want you to get that this is a pretty good time. It's a pretty good time that people never believe, and partly because people never believe it, it doesn't get pre-priced into the market. It's a surprise that happens every two years. Is it perfect? No.

Is it pretty good? Yeah. Is it every single quarter always of those three quarters? No. Sometimes you get a negative quarter in there, but the nine-month stretch is just overwhelming.

So, thank you for listening to me.

The midterm miracle continues as we speak, and actually, I'll finish this with a point that I make often, which is this is the third year of a president's term, and partly because of the midterm miracle, we haven't had a negative third year for president's term since 1939 in the US stock market, which in 1939, going into World War II was only nine tenths of 1% down.

This is a great time period if you like markets that rise. Thank you very much for listening to me.


Ken Fisher finished talking, and a white screen appears with a title “Fisher investment” underneath it is the red YouTube subscribe Button.


Ken Fisher: Subscribe to the Fisher investment YouTube channel. If you like what you've seen, click the bell to be notified as soon as we publish new videos.


A Series of disclosures appears on screen: “Investing is Securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice or a reflection of the performance of fisher investment or its clients. Nothing herein is intended to be a recommendation or a forecast of market conditions. Rather it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. Not all past forecasts were, nor future forecasts may be, as accurate as those predicted herein.



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