Market Commentary: The bull turns four, and a look at the midterm election

The four-year-old bull market could continue rising for longer, while the midterm elections are more likely to produce mixed government than a major market disruption.

• The S&P 500 has gained close to 120% on a price basis and 131% including dividends since the October 2022 low, while the Bloomberg Gold Index rose 144% and the Bloomberg Aggregate Bond Index 15% over the same period.
• Among the seven bull markets since 1950 that reached their fourth birthday, the current cycle has the third-best start and is the eighth-longest; every bull market that reached age four in the past 50 years also reached age five.
• Year five of previous bull markets produced an average gain of nearly 19%, with only one bear market, in the early 1960s; the two stronger fourth-year performers gained 36% in the 1980s and 21% in the 2010s during their fifth years.
• Republicans hold the House 219–214 and the Senate 53–47, making a Democratic House takeover likely because the president’s party has lost House ground in 18 of 20 midterms since 1946, while the Senate remains close to a toss-up.
• Democrats need roughly a 3–4% national advantage to have a 50/50 chance of winning the House, compared with a current generic-ballot polling advantage of 7.9%; in the Senate, they must gain four seats while avoiding losses in vulnerable states such as Michigan, Minnesota and New Hampshire.
• The 10-year Treasury yield has risen from 3.95% to as high as 5.31% since the Middle East conflict and the closure of the Strait of Hormuz, but mixed government could limit further pressure by constraining tax cuts and spending, even though bipartisan horse-trading may preserve fiscal stimulus.

Takeaway: Investors should remain open to above-average equity returns over the next year and avoid making decisions based on political enthusiasm or anxiety, while recognizing that mixed government may moderate fiscal excesses without restoring fiscal discipline.