Midterm Elections Stock Market Patterns: What History Says

With the 2026 midterms just days away, a familiar question is back in search bars and group chats: do elections actually move markets? Political headlines are loud, and political shocks can rattle portfolios fast, but the midterm elections stock market record is more consistent, and more misunderstood, than most people expect.

This guide breaks down:

• What the presidential election cycle theory says

• How stocks have behaved before and after past midterms

• Why a historical pattern is not the same as a forecast

• How systematic investors test calendar effects instead of guessing

What Is the Presidential Election Cycle Theory?

The presidential election cycle theory holds that U.S. stock returns tend to follow a rough four-year rhythm tied to the presidential term. It was popularized by Yale Hirsch, who published the first Stock Trader's Almanac in 1967.

The logic is that political incentives shift through a term:

• Year 1 (post-election): new administrations push their toughest policies early, and first years have historically been weak

• Year 2 (midterm): control of Congress is up for grabs, and policy uncertainty rises

• Year 3 (pre-election): historically the strongest year of the cycle

• Year 4 (election year): attention turns to the presidential race

Where the Midterm Year Fits in the Four-Year Cycle

The midterm year is the second year of a presidential term. T. Rowe Price's analysis of S&P 500 returns since 1950 found that midterm years produced the lowest average returns of the four-year cycle. The year that follows, year three, posted the strongest average returns, with gains in 16 of the 18 years analyzed.

Midterm Elections Stock Market History: What the Data Shows

Across decades of midterm elections stock market data, the pattern has tended to unfold in two acts: a choppy run-up to the vote, then a calmer stretch once results are known.

Midterm Election Year Volatility: The Pre-Vote Slump

Midterm election year volatility is well documented. Oppenheimer Asset Management found that the S&P 500's average peak-to-trough drawdown in midterm years since World War II has been roughly 16%, deeper than in any other year of the cycle.

BNY's Investment Strategy & Research Group points to three common sources of pre-election swings:

• Uncertainty about the outcome

• Potential policy changes

• Shifting campaign agendas

For perspective, LPL Research notes that the average calendar year includes a drawdown of roughly 14%, yet annual returns were positive in 35 of 46 years. In other words, midterm dips have been an exaggerated version of normal market behavior, a reminder of why volatility is often called a feature, not a bug.

The Stock Market After Midterm Elections

The stock market after midterm elections tells a different story. BNY calculates that, going back to 1950, the S&P 500 gained an average of 16.6% in the year following a midterm. Capital Group likewise notes that stocks have always posted positive returns in the year after a midterm.

The usual explanation, according to BNY, is that once the outcome is settled, the market has often rallied regardless of which party won.

Political Gridlock and the Stock Market

Midterms often produce divided government. State Street Global Advisors observes that polls and prediction markets point to divided government as the most likely 2026 outcome, and that markets often prefer it because fewer legislative surprises let fundamentals play a bigger role.

The political gridlock stock market argument has some history behind it. AllianceBernstein found that since 1928, the S&P 500 delivered double-digit average annual returns in years when the two parties shared control of Congress.

Why a Pattern Isn't a Prediction

Before treating any of this as a playbook, consider the limits:

• Small sample size: BNY's data covers just 19 midterm elections since 1950, too few for statistical certainty.

• Macro can overwhelm the calendar: interest rates, inflation, and earnings drive prices too. Advisor Perspectives cautions that pinning market returns on election outcomes ignores too much of what actually drives asset prices.

• Timing is unknowable: as Oppenheimer puts it, "nobody rings a bell at the low."

• Past performance does not guarantee future results: a streak can end at any time.

From Calendar Pattern to Seasonal Investing Strategy

For systematic investors, midterm elections stock market patterns are a hypothesis to test, not a headline to react to. That is the core of any seasonal investing strategy: define a calendar-based rule, then examine how it would have behaved across many different market environments. Calendar effects can also fade, as seen when year-end seasonal patterns broke down.

Backtesting Trading Strategies Around the Election Cycle

Backtesting trading strategies means running a rule against historical data before relying on it. A midterm-cycle backtest might examine:

• Exposure during the historically weaker months before the vote

• Behavior in the 12 months after the election

• Results in midterm years that coincided with high rates or recessions

• Maximum drawdowns, not just average returns

Keep in mind that backtests are hypothetical. They can be overfit to a small sample and do not predict future results.

Why Rules-Based Investing Takes the Guesswork Out

Election season tempts investors to act on predictions about who will win and what it will mean. Rules-based investing replaces those calls with predefined criteria, such as trend signals, volatility thresholds, or calendar windows, applied consistently regardless of headlines. It doesn't remove risk, but it is designed to limit emotionally driven decisions when the noise is loudest.

The Bottom Line

The midterm elections stock market record shows a recognizable rhythm: more turbulence before the vote, and historically firmer markets afterward. But with fewer than two dozen data points and plenty of macro noise, that rhythm is best treated as one input to study, test, and understand, not as a forecast.

Rules Over Predictions: A Different Way Through Election Season

Every section of this post points to the same tension. Midterm years have historically brought deeper pullbacks, the months after the vote have historically been firmer, and nobody knows in advance where the low will land. Trading on who wins means getting two calls right: the election outcome, and how the market reacts to it.

ROAR Score MODERATE is built around a different idea: stay partly invested at all times, and let a defined signal, not a forecast, decide how much additional exposure to carry.

How the strategy is structured:

• A constant core. Half of the strategy holds SPY at all times, so it keeps broad S&P 500 exposure through every phase of the election cycle instead of trying to time an exit and re-entry.

• A tactical sleeve. The other half shifts between additional equity exposure and cash (via BIL), based on the ROAR Score's read of market conditions.

• Signals, not headlines. Allocation changes follow the ROAR Score, not polls, campaign promises, or election-night results.

• No outcome to call. Because it responds to market conditions rather than political results, the approach doesn't depend on predicting which party controls Congress.

• Hands-off once connected. The rules run automatically on the platform. That is designed to limit in-the-moment decisions when election noise is at its loudest.

• Logic you can review first. The strategy's structure and rules are laid out on its page, so you can understand how it behaves before making any decision.

What to keep in mind:

• The 50% SPY core means the strategy participates in market declines, including midterm-year drawdowns like those described above.

• Moving part of the portfolio to cash can mean missing gains if markets rise while that sleeve is out.

• Like any rules-based approach, the ROAR Score can produce signals that turn out to be wrong. No strategy eliminates the risk of loss.

  Explore How the Platform Handles This →  

This content is for informational purposes only and is not investment advice or a recommendation to buy or sell any security or strategy. All investing involves risk, including the possible loss of principal. Past performance, including the historical index data cited in this article, does not guarantee future results. [Advisory services are provided by Quantbase, LLC, an SEC-registered investment adviser; Surmount is the technology platform used to access strategies. Confirm wording with compliance.]

Frequently Asked Questions

Do stocks go up after midterm elections?

Historically, the stock market after midterm elections has been positive: BNY data shows the S&P 500 gained an average of 16.6% in the 12 months following each midterm since 1950. Past performance does not guarantee future results.

Why are midterm years so volatile for stocks?

Midterm election year volatility usually stems from uncertainty over which party will control Congress and what that means for policy. Oppenheimer found the average midterm-year drawdown since World War II has been about 16%.

What is the political gridlock stock market effect?

It's the idea that divided government limits sweeping policy changes, leaving fundamentals to drive prices. AllianceBernstein found the S&P 500 averaged double-digit annual returns in split-Congress years since 1928.

How reliable are midterm elections stock market patterns?

They're consistent but statistically thin. With only 19 midterms since 1950, and macro forces like rates and inflation in play, the pattern is better treated as a hypothesis than a forecast.

How can you test a seasonal investing strategy around elections?

Backtesting trading strategies lets you run calendar-based rules against historical data before relying on them. Backtests are hypothetical, can be overfit to small samples, and do not predict future results.