A few days ago, The Economist released an investigative report on the historical cycles of the US stock market, which caused a major stir in the macro investment community but was barely mentioned in the crypto space. This report reveals a brutal century-long pattern—the "midterm election curse."

According to The Economist’s backtesting of nearly a hundred years of data, the second year of a US president’s term (the year before the midterm elections) is the worst-performing and riskiest year in the four-year US stock market cycle.

Non-election years: The average annualized return of the S&P 500 is 8.1%.

The year before the midterm elections: This figure plummets to a dismal 0.3%.

This means that, from a historical probability perspective, you can hardly make any money in the year before the midterm elections. What’s more, this year is often accompanied by severe market volatility, with an average drawdown as high as 19%.

The logic behind this is simple: Capital hates uncertainty the most. Midterm elections not only determine control of Congress but also serve as a "midterm exam" for the ruling party. Policy variables are enormous, and liquidity often tightens at this time, putting pressure on risk asset valuations.

Out of curiosity, I immediately did some vibe coding, fed historical data to AI, and produced the chart below.

👇 You can see the results for yourselves in the chart (P1). To be rigorous, I aligned all the time axes to "November 1 of the year before the midterm election."

🔵 Blue is the 2014 cycle

🟠 Orange is the 2018 cycle

🟢 Green is the 2022 cycle

🔴 Red is the current cycle, playing out now

Ps: What can you see from the chart?