McDonald's is the world's largest restaurant chain, with more than 45,600 fast-food restaurants in over 100 countries. Approximately 95% of McDonald's restaurants worldwide are owned and operated by independent local business owners. The company has 150,000 employees. The shares are a component of the S&P 500.

The Stock Market: Challenging Walk-up to the Midterms The second year of the presidential cycle is the most challenging year of the four for stocks. That is true if measured from World War II or from 1960 or (as we often do) from 1980. The first year of the cycle presents a brand-new or successful second-term president with optimism and momentum in their wake. The third year sets up the second half of the presidential term, often under a reconfigured Congress. And the fourth can be dominated by both parties developing and refining platforms that they will present in the general election that wraps the year. The second year of the presidential cycle features a presidency no longer in the first bloom of victory and facing the normal challenges and obstacles of governing. Mainly, the second year of the cycle culminates with the midterm elections, which historically have seen some loss of power by the president's party. In addition to the second year of the cycle being the most difficult of the four for stocks, the months immediately preceding the midterms are particularly challenging. Investors are anticipating that the current political dynamic will be disrupted. Preelection advertising is highly negative, potentially contributing to any preexisting consumer anxiety. The months following the midterms can also be difficult, as the new political road map has been drawn and investors contemplate the consequences. The Presidential Cycle and Midterm Election Year For all years from 1980 through 2025, the S&P 500 has averaged capital appreciation of 10.6%. There is, however, quite a bit of variability across the presidential cycle. According to Argus analysis and based on closing prices for the S&P 500 over the 1980-2025 time period, the third year of the presidential cycle has produced the best returns, with an average gain of 16.5% for the index. Of the 11 third years since 1980, the market has failed to appreciate in double digits four times; excluding those years, the average gain is 25.2%. In the third year, the midterms have been settled. Typically, the sitting president's party loses seats in both the House and Senate. That often leads to political stalemate. Historically, periods of Washington stalemate allow companies to conduct their business planning and operations without heightened risk of political interference. Wall Street is said to favor such periods. The second-best year of the cycle is the first year of the presidency. With optimism and energy in full force, the S&P 500 since 1980 has averaged a gain of 15.5% in the first year of the presidency. In only two of the 11 years since 1980 has the S&P 500 declined in the first year of the presidential cycle. The fourth year of the presidential cycle shows an average gain of just 5.4% since 1980. That percentage return is distorted by inclusion of 2008, when the Great Recession kicked off and the S&P 500 declined 38.5%. Excluding 2008, the average gain in the final year of the presidential cycle is 10.3%, not far off the average gain of 10.6% for all years from 1980 to 2025. The second year of the presidential cycle, the midterm election year, has averaged a gain of 3.3% on the S&P 500 since 1980. Five of the 11 midterm years since 1980 were negative, by far the worst track record of any single year in the cycle. The best and worst midterm years are tightly clustered. In 1998, the S&P 500 rose 26.7%, as the 1990s stock rally approached its peak. And in 2002, the index fell 23.4% in the wake of 9/11 and as the dot.com boom imploded. In the most recent midterm year of 2022, the S&P 500 declined 19.4%, as inflation peaked at 40-year highs. The Three Months Heading into the Election In the three months of August through October in the second year of the cycle, the national mood turns from carefree summer enjoyments to a more serious tone ahead of the pending elections. For all midterm years from 1980 to 2025, the S&P 500 has averaged a decline of 1.1% from the eighth month through the 10th month. The worst such period was in 1982, when the S&P 500 fell 19.9% from August through October. The 1981-82 recession was among the deepest postwar downturns, amid soaring inflation. The best of these three-month stretches occurred in 1990, with the market rallying 17%, as the decade-long stock rally was getting underway. Most recently, stocks rallied 6.7% in August through October 2022, as inflation climbed down from peak levels. Once the midterm election is past, and negative political ads are no longer ringing in our ears, the market should have room to rally - but, unfortunately, it does so only sporadically after the election. On average, the S&P 500 has declined an additional 1.9% in November and December of the midterm years. Most recently, the index rallied 8.2% across the final two months of 2022. In the first two years of his first term, President Donald Trump was backed by solid Senate and House majorities; the House flipped to majority Democrat in the 2022 midterms. Mainly, November 2022 featured the launch of ChatGPT. Inflation was coming down off its highs, and the artificial intelligence (AI) gold rush was about to begin. Conclusion Particularly after Labor Day, both parties will shift into high gear as they seek to drive voters to the polls for what has historically been a low-turnout event. News flow is dominated by the various campaigns, and political ads dominate traditional TV broadcasting. Given that more and more consumers get their media outside of traditional venues such as radio and broadcast TV, political ads spill across social media, podcasts, and other nontraditional sources. The year 2026 will likely feature an environment in which consumers will be hard-pressed to differentiate between candidate-generated content and the onslaught of AI-generated or AI-modified political content. Normally, the president's party would lose Congressional seats in the midterms. But gerrymandering that is net favorable to the GOP and the president's popularity with the MAGA core could make the election a toss-up. The war with Iran is now mainly an economic war. Bond yields have moved to multiyear highs, and inflation could move higher without some kind of resolution in the Strait of Hormuz. These are not the only factors in the equation, of course. Corporate earnings have never been stronger, and gross domestic product growth (adjusted for AI-related imports) is solid. Stocks are up in low-double-digit percentages heading into September, about where they were heading into August. These positives may be enough to sustain or even build on double-digit stock gains in this second and toughest year of the presidential election cycle.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

McDonald’s is the world’s largest restaurant brand, with nearly $139 billion in systemwide sales across more than 45,000 restaurants and over 100 markets. The quick-service chain built its early reputation on speed, consistency, and affordable hamburgers, and today its global menu spans burgers, chicken, breakfast, and beverages that have helped popularize American fast-food cuisine globally. The firm derives the bulk of its revenue from franchise royalties and rent (about 62%), with the remainder stemming from company-operated restaurants across three segments: the United States (39% of systemwide sales), internationally operated markets (35%), and internationally developmental/licensed markets (26%).