With the US midterm election voting day approaching, this article reviews the market's potential turning point and the Nikkei 225's performance. The future course of stock markets could change significantly depending on the 3 November election results.
The US midterm elections will be held on 3 November, with all House seats and approximately one-third of Senate seats up for election. Pre-election opinion polls indicate that the Republicans are at a disadvantage, and the results could have a major impact on US politics and the economy and on stock markets.
The Nikkei 225 rose ¥596 in one week during the final week of October, supported by rebounds in AI and semiconductor stocks, and reached ¥64,831 on the 29th. However, after corporate earnings announcements that day, the outlook for US companies' earnings fell below market expectations, and the Nikkei declined on the 30th, led by semiconductor and AI-related stocks. The emergence of a dead cross has also been noted, and the outcome could vary significantly depending on this weekend's closing level.
There is a historical pattern of US stocks rising for approximately 1 year after midterm elections, but its recurrence is considered uncertain amid concerns over excessive AI investment, higher interest rates and instability in the Middle East.
The view remains that Japanese stocks are still substantially undervalued and have considerable long-term upside, while a policy of considering additional purchases on the basis of time diversification has been indicated.