🦉 Hold Onto Your Hoots: Is this Mid-Term Year Going To Be “Mid?”
Welcome to 2026! And welcome to the first quarter of a mid-term year. I wanted to share a few things I
am thinking about to start the year. My first thought is about how markets perform historically in a mid
term year of an election cycle, and what January tell us about how the rest of the year goes.
Historically, Q1 of an election year is one of the market’s least exciting stretches. Not a disaster, not a
party… just a little weird. On average, Q1 in a mid-term year is up about 0.7%, making it one of the
weaker quarters in the four-year Presidential Cycle. And if history has a sense of humor (it usually
does), Q2 often follows with a pullback, averaging a 3.1% decline. In other words, some early-year
chop isn’t a warning sign, it’s normal. I am going to be watching that and to see if those patterns
continue.
In additional, January always gets a lot of attention, especially from me, thanks to what’s known as the
“January Barometer.” Historically, January has been a decent early signal for how the S&P 500 finishes
the year. Since 1950, when January is positive, the S&P 500 has gone on to finish the year higher about
89% of the time, and those years have tended to produce above-average returns. Which I would
consider a strong signal. When January is negative, however, the signal is much weaker. The market
has still finished the year positive many times after a down January, and a rough start does not reliably
predict a bad year. However, it brings less odds of good news. In short, I like to look at January, and I
am rooting for it to be positive, but even if it isn't, my opinion will not be married to the outcome.
The Axio takeaway is simple: volatility is not the same thing as danger. If trends continue, mid-term
years are historically choppier, emotionally louder, and full of head-fakes, but they are also
completely normal. We don’t try to outsmart the calendar or panic over a rough start if we get one. We
stay disciplined, diversified, and focused on the long game, knowing that every year comes with its
share of uncomfortable headlines.
By now, you’ve probably seen plenty of market outlooks and bold predictions floating around. I read
them for fun — because the truth is no one knows exactly what’s going to happen. If I had to make a
bold prediction, I’d say stocks finish the year up around 12%, with bonds closer to 5%. No different
than last year, I think we will have some choppiness in the first half and have a strong second half
(which was my prediction, by the way. And I was right. Kudos to me). I believe the path won’t be
smooth, but markets rarely move in straight lines anyways. We will see what happens, but I am
optimistic.
Fun fact. For anyone out there in the “just buy the S&P and hold” camp, last year offered a
helpful reminder: commodities, international stocks, and emerging markets all
outperformed the S&P 500 by a wide margin. Opportunities don’t live in just one corner of
the market. I believe there will be different opportunities this year. It already started that way.
Lastly, why am I still positive on the market with all the headlines out there? Well, here is a
quick note on perspective. This bull market turned three years old (started Oct 2022) and
entered its fourth year last October. That might sound old, but historically it’s not. Looking
back at the 11 bull markets since World War II, the average one lasts more than five years.
In other words, this bull market is still relatively young compared to the averages — even if it
occasionally feels tired (like it did to end the year).
Markets will do what markets do. Our job is to make sure your plan still makes sense while
they do it.
Until Next Time,
Wes
Securities offered by Alexander Capital LP Member FINRA/SIPC……. The above summary has been obtained from
sources we believe to be reliable, but we cannot guarantee its accuracy or completeness. Past performance is no
guarantee of future results.The article and opinions in this publication are for general information only and are not
intended to provide specific advice or recommendations for any individual.
Past performance is not a guarantee of future performance. Alexander Capital, LLC does not offer tax or legal advice
Wise Words from Wes
