Notably, all along the path, the market undershot on the earnings multiple.
And here we are again, with a forward P/E on stocks at 17.8 times. Even with earnings at the dialed down levels, if we apply a P/E of 20x for earnings expected over the next twelve months, we get a price target on the S&P 500 that implies 12% higher (from current levels).
With that, remember, going back to 1950, there has never been a 12-month period, following a midterm election, in which stocks were down.
And the average one-year return, following the eighteen midterm-elections of the past seventy years, was +15% (about double the long-term average return of the S&P 500).
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