Market Perspective
Investing through a midterm election
The S&P 500, an index of 500 of the largest U.S. companies, closed at a record high on October 6, four weeks before the midterm elections on November 3. That is not how a midterm year usually looks. Since 1931, the S&P 500 has gained an average of about 4.7% in midterm years, compared with about 9.5% in all other years. This year it is up about 14%.
2026 against the midterm-year average
The election will dominate the news between now and November 3, and history has a clear answer to most of the questions it raises for investors. This note draws on the research we rely on in managing client portfolios and on the century of market data we published on this site in July. It will not tell you who is going to win. I do not know, and the record shows the winner has mattered far less to portfolios than the coverage suggests.
Why midterm years have been the hardest year of the presidential term
Market historians track returns across the four years of each presidential term. In our century of data, the midterm year has been the weakest of the four, and the year after it has been the strongest.
Average annual return by year of the presidential term
The dips inside midterm years have also been deeper. In a typical midterm year since 1950, the S&P 500 at some point fell about 17.5% from a high to a later low, compared with about 11% to 13% in the other three years of the presidential term. Those figures measure the deepest dip inside each year, not the change for the full year.
In midterm years, stocks have usually been weakest in the months before Election Day. In our data, the largest decline of the year reached its low between June and October in 18 of the 24 midterm years since 1930. The reason is uncertainty: the months before the vote carry the most doubt about taxes, spending, regulation, and which party will control Congress.
The month each midterm year’s largest decline reached its low
Much of the expected result is already in prices before anyone votes. From my time at Wharton studying derivatives, one idea has stuck with me: a price already reflects what investors expect, so it moves on what they did not expect. Economists call this idea the efficient market hypothesis. Midterms also tend to have a narrower range of outcomes than presidential races, so markets can begin pricing the result before the vote. On October 7, prices on Kalshi and Polymarket, two prediction markets where people trade contracts on election results, put the chance that control of the House shifts from Republicans to Democrats at about 90%, and the chance of the same shift in the Senate at roughly 62% to 65%. Those are market prices, not forecasts, and they move every day.
Two election nights show the difference. In 2018, voters delivered the result most forecasts expected, and the S&P 500 rose 2.1% the next day. In 2016, as the vote count moved toward Donald Trump, whom forecasters and betting markets had rated less likely to win, S&P 500 futures, contracts that trade overnight on the index’s value, fell about 5% and hit the overnight trading limit set by the Chicago Mercantile Exchange. By the close the next day, the S&P 500 was up 1.1%. The surprise moved markets more than the result itself, and in 2016 the drop lasted a single night.
How markets have behaved after the vote
The uncertainty about the election has tended to fade as Election Day approaches, and stocks have often started to rise before the votes are counted. According to research, October has been the strongest month of a midterm year since 1950, averaging close to 3.0%, and November has averaged 2.7%. Since 1950, the S&P 500 has been higher 12 months after every midterm election, 19 times out of 19, with an average gain of about 15%. Our own data in “A century of the market, month by month,” which covers every midterm election since 1930, shows the market higher in the year after 23 of those 24 elections.
The stock market in the 12 months after each midterm election
Stocks have tended to rise after midterm elections no matter which party held the White House or won control of Congress. We made the longer case for keeping politics out of a portfolio in that same July post. Marc Zabicki, chief investment officer of LPL Financial, the firm through which we offer our services, gives a simple test for anyone tempted to trade on the election: to profit from an election forecast, an investor has to be right three times, about the winner, about the policy that follows, and about how markets react to that policy.
What the history means for investors
Midterm averages describe probabilities. They do not predict any single year, and 2026 has already shown that by running well ahead of the midterm average. In my view, investors can prepare for market swings between now and the November 3 vote without treating them as a signal to sell stocks.
First, expect a decline at some point. The figures earlier in this note show that a dip along the way is normal in every year of the presidential term, not only in midterm years. Since 1980, the S&P 500 still finished the year higher in 35 of 46 years. A drop before the vote would be normal.
Second, keep some cash available. Cash gives a portfolio room to rebalance if prices fall before the vote, or to add to investments that fit the plan, without having to sell something else to do it.
Third, check the plan, not the polls. The weeks before an election are a good time to confirm that a plan still fits a household’s goals, time horizon, and need for cash. Those answers rarely depend on who wins.
Across nearly a century, midterm years have followed a consistent pattern: larger swings before the vote, and stronger markets after it, regardless of the outcome. Chris Fasciano, chief market strategist at Commonwealth Financial Network, put the conclusion in one line in March: “the best investment strategy during an election year is to vote in the booth, not in your portfolios.”
LPL Research: Marc Zabicki, “Investor Preparation for the U.S. Midterm Elections,” October 1, 2026. George Smith, “Weak September Seasonals Precede Strong Midterm Trends,” September 1, 2026. Jeff Buchbinder, “Midterm Elections: Volatility Creates Opportunity,” July 22, 2026. Chris Fasciano of Commonwealth Financial Network, “Do Midterm Elections Matter for Markets? A Historical Perspective,” March 18, 2026. Other sources: Capital Group, “How US midterm elections affect the markets,” January 26, 2026. Carson Investment Research, July 29, 2026. J.P. Morgan Asset Management, Guide to the Markets, intra-year declines chart, March 13, 2026. Kalshi and Polymarket contract prices, October 7, 2026. S&P 500 closes for November 7, 2018 and November 9, 2016, and CME overnight futures data for November 8 to 9, 2016, as reported by Reuters, Bloomberg, and FRED. S&P Dow Jones Indices. CRSP U.S. total market returns via the Kenneth R. French Data Library. Market data: As of the close on October 6, 2026. Important: The opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested in directly. For informational purposes only; not investment advice or a recommendation to buy or sell any security.
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