Happy New Year! Time for my 2022 Market Outlook
I wanted to explain what I’m expecting in the new year. And tell you about a top resource I believe all traders should have.
I often include notes in my daily newsletter about the historical averages. These trends are significant as history tends to repeat itself.
When the market expects something to happen, the prophecy can often become self-fulling.
Looking forward to 2022, I’m looking for the bull market to continue. But I’m not expecting the outsized gains we saw in 2021.
The American stock market has a four-year cycle, restarting with the Presidential election. 2020 was the election year, 2021 was the first year of a new term. And 2022 is the midterms…
Never forget, the market hates uncertainty, and elections bring a lot of uncertainty. Often, uncertainty ahead of the midterm elections can lead to pessimism and selling in the year’s first half.
2023, the year after midterms, tends to be the best of four years. And when the incumbent is up for reelection, as we assume Biden will be, the gains are even higher.
But let’s not get ahead of ourselves. Here’s a look at the market’s historical returns for midterm election years…
2022 Market Outlook, Average S&P 500 Returns:
- All Years (since 1930): +7.7%
- All Midterm years (since 1946): +6%
- First-term President Midterm (since 1946): +0%
- Democrat President Midterms (since 1946): +4%
Historically, the best returns came from buying the dip in October and November in the midterm years. I plan to trade this seasonality accordingly.
I intend to be mostly cash come April, ahead of the start of the worst six months that traditionally begins in May.
Then I plan to buy the dip in October and continue to buy dips up to the beginning of November. After the elections, I’ll look to sell into the rally near the end of the year.
Stay tuned to the newsletter for the latest and greatest. I’ll be adjusting my strategy as the year rolls on.
But before you ring in the new year, you need to have the right tools. Here’s one of my favorite resources that I’ve used for years…
Top Resource for Traders
I’m super excited to see that the “Stock Trader’s Almanac 2022” is only $30 this year (~$33 for a hard copy).
You can also get a copy by subscribing to their newsletter, but the cost of the whole package is significantly higher ($20/month, $180/year).
I’ve come up with a bit of a hack so you can take advantage of their almanac and get the latest thoughts and notes from the Almanac’s author without paying full price.
First, buy the almanac on Amazon using this link. It’s only $30!
Then follow Jeffrey Hirsch on LinkedIn or Twitter. He often shares the newsletter he sends to subscribers for free on social media. You won’t get all his picks but reading his insights once a month is well worth the effort. And it’s completely free.
Lastly, keep reading the Trading For Keeps newsletter.
I incorporate his insights into my newsletter regularly. My version is the stripped-down bare-bones version. But it’s all most people need.
Thanks for reading, and Happy New Year!
-Michael Johnson
Editor in Chief
Trading For Keeps
BTW some links in this post are affiliate links. That means we’ll receive a commission if you follow the link and buy something. Those commissions help keep my service free. It will not increase the price you pay.