U.S. stocks may see post-midterm buying opportunity, Alpine Macro says

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Post-midterm stock buying opportunity

Highlights

Alpine Macro notes the S&P 500 gained 11% ahead of the midterms versus the historical 1.6%, prompting expectations of pre-election risk-off trading.
Nick Giorgi projects any election-related equity dip as a buying opportunity, citing the S&P 500's 13.8% average nine-month post-midterm gain since 1970.
Prediction market Kalshi assigns 66% odds of Democrats winning the Senate and 90% for the House, while divided government historically yields a 14% S&P 500 return.

Election positioning and market setup

As reported by CNBC, Alpine Macro says the U.S. midterm elections set up stocks for a "sell the rumor, buy the news" trade after the S&P 500 rose more strongly than in typical pre-midterm periods.

Chief equity strategist Nick Giorgi says the S&P 500 averages a 1.6% return in the nine months leading up to the last 14 midterm elections, compared with an 11% gain in the current cycle. He says that stronger-than-usual gains ahead of the vote could prompt investors to cut equity exposure before the Nov. 3 contest.

In a note to clients, Giorgi says investors should "expect pain before gain" as equities enter what he describes as a drop zone through the U.S. midterms, with outcomes skewed toward risk-off trading. Still, he says any election-related dip would represent a buying opportunity rather than a longer-term warning sign.

Historical returns and divided government outlook

Giorgi says the broader historical pattern remains supportive for equities after midterm elections. Since 1970, the S&P 500 has generated an average price return of 13.8% in the nine months following midterms, which Alpine Macro views as evidence that the recent advance is still building rather than running out of steam.

Prediction market platform Kalshi shows traders assigning a 66% chance that Democrats gain a majority in the Senate and a 90% probability that they control the House. Those odds do not follow the same methods as traditional political polling, but they still point to investor attention on possible election outcomes.

If control of government is split between Republicans and Democrats, Giorgi says equities could receive an additional lift. He says the S&P 500 averages a 14% return when government control is divided.

Our earlier coverage highlighted how the S&P 500’s push toward 8,000 was being tested after a midsummer rally led by AI-linked megacaps. We noted that investors were balancing upbeat third-quarter earnings expectations against headwinds such as higher oil prices, elevated Treasury yields, weakening market breadth, and added uncertainty heading into November’s U.S. midterm elections.

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