History Favors a Post-U.S. Midterm Election Rally

Funds in focus: Brompton Enhanced Multi-Asset Income ETF

With the U.S. midterm elections approaching on November 3, 2026, investors are increasingly focused on the potential implications for equity markets. Historically, midterm election years have been characterized by weaker equity market performance and heightened volatility relative to non-midterm years. This pattern is particularly evident when examining the four-year U.S. presidential cycle, where the second year has delivered the lowest average returns. Between 1945 and 2025, the S&P 500 generated an average gain of just 3.8% during midterm election years, significantly below the 10.9% average recorded across the remaining three years of the presidential cycle.1 Midterm election years are shown to have the largest average drawdowns with 18%, versus an average drawdown of 12.4% for the other three years in the cycle.1

Several factors may contribute to this historical pattern. Political uncertainty surrounding potential changes in congressional control, fiscal policy, taxation and regulation can weigh on investor confidence. At the same time, midterm elections often coincide with a period when the administration’s initial policy initiatives are being reassessed, creating additional uncertainty around the economic outlook.

S&P 500 average price returns during the presidential cycle since 1945

Average % Price Changes
Presidential
Cycle
Q1 Q2 Q3 Q4 Full
Year
Year 1 0.0% 3.2% 1.5% 4.1% 9.5%
Year 2 0.8% -2.6% -0.8% 6.4% 3.8%
Year 3 7.0% 4.7% 0.4% 3.8% 16.3%
Year 4 0.6% 3.2% 1.2% 2.3% 6.8%

Source: CFRA, JP Morgan, October 15, 2026

Despite the relatively weak performance leading into midterm elections, historical market returns following the vote have been considerably stronger. Since 1950, the S&P 500 has generated positive returns in the 12 months following every midterm election, with an average gain of approximately 15%.1 This historical resilience suggests that the removal of political uncertainty can provide a favourable backdrop for equities, allowing investors to refocus on corporate fundamentals, earnings growth and monetary policy. Importantly, the historical post-election recovery has occurred under both Democratic and Republican administrations, suggesting that the resolution of uncertainty may be more influential than the election outcome itself.

The upcoming midterm elections take place against a backdrop of elevated equity valuations, solid market performance (S&P 500 up 14% YTD2), significant investment in artificial intelligence infrastructure and ongoing uncertainty surrounding trade policy, inflation and interest rates. While historical patterns suggest that election-related volatility could create attractive entry points, the magnitude and sustainability of any post-election rally will ultimately depend on the underlying economic and earnings environment.

Brompton’s Approach

We believe maintaining a disciplined investment approach focused on fundamentals remains more important than attempting to predict political outcomes. We see periods of politically driven market weakness as providing opportunities to selectively increase exposure to high-quality companies with durable earnings growth, strong balance sheets and attractive long-term fundamentals. Against this backdrop, a diversified blend of global equities and fixed income offers investors a way to maintain equity exposure for a potential post-election recovery while diversifying across asset classes amid ongoing uncertainty.

Brompton Enhanced Multi-Asset Income ETF (BMAX) offers a unique multi-asset approach which combines global equities and fixed income securities (including non-traditional preferred share investments) into a diversified portfolio solution. By combining a variety of investment strategies, diversified by geography, sector and asset class into a single exchange-traded fund, BMAX provides investors with an efficient way to access a portfolio built for various market conditions.

Annual compound returns3
Fund Distribution Yield4 1-Year 3-Year Since Inception
Brompton Enhanced Multi-Asset Income ETF (BMAX) 10.7% 12.2% 18.8% 16.2%
1 Source: CFRA, JP Morgan, October 15, 2026. 2 Source: LSEG Datastream, as at October 15, 2026. 3 Returns are for the periods ended September 30, 2026 and are unaudited. Inception date October 18, 2022. The table shows the ETF’s compound returns for each period indicated. Past performance does not necessarily indicate how the ETF will perform in the future. The information shown is based on net asset value per unit and assumes that distributions made by the ETF during the periods shown were reinvested at net asset value per unit in additional units of the ETF. 4 Distribution rate is based on September 30, 2026 closing market price. Source: LSEG Workspace. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy the securities referred to herein. The opinions contained in this report are solely those of BFL and are subject to change without notice. BFL makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, BFL assumes no responsibility for any losses or damages, whether direct or indirect which arise from the use of this information. BFL is under no obligation to update the information contained herein. The information should not be regarded as a substitute for the exercise of your own judgment. Please read the prospectus before investing. Commissions, trailing commissions, management fees and expenses all may be associated with exchange-traded fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.Exchange-traded funds are not guaranteed, their values change frequently and past performance may not be repeated. Information contained in this document was published at a specific point in time. Upon publication, it is believed to be accurate and reliable, however, we cannot guarantee that it is complete or current at all times. Certain statements contained in this document constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to matters disclosed in this document and to other matters identified in public filings relating to the ETF, to the future outlook of the ETF and anticipated events or results and may include statements regarding the future financial performance of the ETF. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances.

Varun Choyah

Assistant Vice President & Associate Portfolio Manager

Mr. Choyah specializes in equity security selection with a focus on the global technology and healthcare sectors. Previously, he was a research associate covering technology equities at various Canadian investment dealers for nearly a decade.

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