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Midterm comparisons too strong to ignore
If it walks like a duck, and quacks like a duck, it’s probably safe to treat it like a duck until there’s enough invalidation or evidence we are seeing a deviation. We’ll start with the obvious similarity and that one is simple: 2022 and 2026 are both midterm years.
The average midterm year sees an average drawdown of 15 to 17%
Historically that stat alone is worth paying attention to and we have not had that large of a drawdown yet (if it repeats). I think it’s a fair argument that we did get that kind of drawdown in Year 1 of the presidency which is atypical so whether or not we do that back to back is and was my initial skepticism.
7 reasons so far we are seeing 2022 and 2026 play out the same
These are some of the strongest arguments for why I think it’s ok to be a little conservative with trading this year and why having some cash or preparing for downside by actively trading or hedging might by the move. A year where survival over growth is probably the play regardless of the outcome.
1) OIL prices spiking
We once again find yourself in a midterm year talking about high gas prices and instead of Ukraine/Russia as the reason to blame we find ourselves talking about Iran the Strait of Hormuz. Different headline, different situations, but the outcomes of energy prices spiking as we start a midterm year: the same.
2) Inflation fears again
Coming off a hot CPI inflation print is relatively similar as what kind of inflation numbers we started getting during midterms. Obviously much different but the headlines are back to talking about inflation and we saw the largest inflation spike in years.
3) FED not looking to cut rates soon
We are going back to the similar discussions of no more fed rate cuts for a while with little to none now expected in 2026. This is similar to the “higher for longer” theme we saw before.
4) 200 day moving averages breaking down
The last time we saw the same kind of Technical analysis and 200 day moving average break down was back in 2022. So yes from a purely trading perspective we are seeing the same kind of price action which did lead to a steeper correction.
5) Elevated valuations coming down
We saw P/E and P/S ratios exceed levels as higher if not higher as 2021 peaks before heading into the 2022 bear market. There’s a clear risk off environment right now which mirrors 2022 closely.
6) Geopolitical tensions leading to VIX volatility and uncertainty
Different global events but the point being that we have continuous headlines and attention focused where tensions are high and markets are reacting to updates. When this happens investors are more likely to panic which leads to bigger volatility swings. Again last seen in 2022 with a similar setup with the VIX.
7) Using the same 2022 price action fractal on 2026 charts
Whether you contest or disagree with the previous points you can’t deny that as of Q1 so far the price action has matched this. Whether looking at the S&P 500 or tracking energy stocks which also are following their same 2022 fractals (even OIL so far) it’s really hard to see a way that it doesn’t keep following when everything else is playing out.
Past history doesn’t mean it has to repeat and here’s what I’m hoping breaks the pattern
We are in a better position with inflation and unemployment although we are also back to talking about recession/stagflation even if the odds now appear to have a lower chance (this can change quickly)
The conflict should have a shorter time frame than Russia/Ukraine so that in theory should mean the markets are more likely to rebound faster if a true deal and peace can be made sooner than later
We already had a big drawdown year in 2025, so historically the odds of back to back is pretty rare but that doesn’t mean it can’t happen