S&P 500 Up 3.7% in May Amid Midterm Summer Slump Risk
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- S&P 500 rose 3.7% in May, defying the typical 2.8% decline seen from the end of April to the end of September in midterm‑election years.
- VIX climbed 11.83% to 16.7, an unusually high level for the volatility index while the market remains in a strong uptrend.
- Nomura analyst Charlie McElligott said the high VIX suggests something may be amiss beneath the surface.
- Dow Jones Market Data shows that from 1928 to 2025, the S&P 500 historically averages a -2.76% return during the midterm election window (end April to end September), with severe drops of over 24% in 1930, 1974, and 2002.
- Jeffrey Hirsch of Hirsch Holdings says investors become uneasy in midterm years as political battles shift focus from earnings, often leading to “sideways choppy” market conditions.
- Jay Hatfield of Infrastructure Capital Advisors notes that May and September are historically weaker months, and that after earnings season investors focus on macro risks such as the Iran conflict, higher oil prices, and inflation pressures.
- Divided government after the midterms is seen as beneficial for stocks, as gridlock can limit major policy changes, according to Hatfield.
Why it matters: Investors face a paradox: the S&P 500’s 3.7% May gain offers short‑term upside, while the VIX’s 11.8% jump indicates heightened market tension; midterm‑season politics, oil price spikes, and inflation risk add pressure, and a post‑election divided Congress offers policy stability that favors stocks.
