Stock Market After Midterm Elections: What the Data Shows

With the 2026 midterms set for November 3, one question keeps coming up: what does the stock market after midterm elections usually do? The historical record is striking, but it comes with real caveats. This guide breaks down what the data shows, why the pattern may exist, and where it falls short.

What a Typical Midterm Election Year Stock Market Looks Like

The midterm election year stock market has historically been the bumpiest stretch of a presidential term.

The Pre-Election Slump

• Since 1950, the S&P 500 has averaged a 17.5% peak-to-trough decline during midterm years, according to Carson Investment Research data cited by Yahoo Finance.

• That compares with average pullbacks of 11.2% to 12.9% in the other three years of the cycle, a reminder that volatility is a normal feature of markets, not an exception.

• BNY points to uncertainty around outcomes, policy changes, and campaign agendas as a source of these pre-election swings, the same dynamic seen whenever politics hijacks the market.

The Post-Election Shift

The tone has historically changed once results are in:

• Since 1950, November and December have ranked as the second- and third-best months of the year, with average S&P 500 gains of 1.7% and 1.5%, according to the Stock Trader's Almanac .

• BNY notes that once the outcome is settled, markets have often rallied regardless of which party won.

How the Stock Market After Midterm Elections Has Performed

The 12-Month Track Record

The headline numbers on the stock market after midterm elections are hard to ignore:

• The S&P 500 has gained an average of 16.6% in the 12 months following midterms since 1950, according to BNY's Investment Strategy & Research Group.

• Deutsche Bank data shows the index rose in all 19 post-midterm periods since 1946 (via Reuters).

• Yardeni Research found the index was higher 12 months later in every cycle since 1954, no matter which party won (via CNBC).

The Exceptions

A perfect streak isn't the same as a uniform one:

• Post-midterm returns have ranged from low single digits to above 30%, based on BNY's historical data.

• Fidelity International notes that some periods, including the post-war years and parts of the last decade, delivered only modest gains.

• In 2022, Reuters reported strategists warning that recession risk could break the streak, a reminder that macro conditions can overshadow the calendar.

What Drives the Pattern

The Presidential Election Cycle

The presidential election cycle theory was put on Wall Street's map by Yale Hirsch when he published the first Stock Trader's Almanac in 1967 (The Big Picture). It splits each term into four years:

• Year 1: Post-election year

• Year 2: Midterm year, historically the weakest

• Year 3: Pre-election year, historically among the strongest

• Year 4: Election year

Under this framework, the stock market after midterm elections is moving from the cycle's weakest stretch into its historically strongest one. Academic research, including the Journal of Finance study "The Presidential Puzzle", has also examined how returns vary with political control.

The Divided Government Stock Market Effect

Midterms often cost the president's party seats, which can split control of Washington. Fidelity International explains the common argument: divided power tends to mean fewer policy initiatives, and less disruption can give markets more certainty.

The divided government stock market data loosely supports this. RBC Capital Markets found average annual S&P 500 returns of 14% under a split Congress, based on data since 1932 (via Reuters).

Uncertainty Clears

A simpler explanation may also be at work. A Bloomberg Opinion column argued that stocks often disappoint before midterms, possibly due to overdone policy anxiety, and then recover (via Financial Advisor magazine). Part of the post-election gain may simply be the slump unwinding.

The Limits of Stock Market Seasonality

Stock market seasonality patterns like this one deserve healthy skepticism:

• Small sample size: Fewer than 20 midterm cycles since 1950 is a thin dataset, and thin datasets are where overfitting and data-snooping do the most damage.

• Possible coincidence: The same opinion column suggested the streak may be spurious.

• Other forces matter more: Cambridge Associates found that too many other factors drive returns for the presidential cycle to serve as a dependable guide.

• No guarantees: Past patterns do not guarantee future results.

Testing a Midterm Election Trading Strategy

A midterm election trading strategy built on gut feel tends to mix headlines, emotion, and hindsight. Systematic investors usually approach the question differently:

• Define the rules in advance, including what changes exposure and why.

• Test across every available cycle, not just the recent ones, ideally using walk-forward analysis rather than a single backtest.

• Measure drawdowns, not only average returns, since drawdown control often matters more than the headline gain.

• Check whether the effect holds once rates, earnings, and valuations are considered.

Where Rules-Based Investing Fits

Rules-based investing doesn't remove risk, but it can replace election-night guesswork with criteria set ahead of time. That matters most when the news cycle is loudest.

It also opens up a different angle on midterms. Instead of guessing outcomes, some systematic approaches track political activity directly, such as lobbying activity, government contracts, and trades disclosed by members of Congress, using consistent rules rather than reactions.

Key takeaways:

• The stock market after midterm elections has risen in every 12-month period since at least 1950, but the size of the gains has varied widely.

• Midterm years have historically brought deeper pullbacks than other years of the cycle.

• Rates, earnings, and recessions can override any calendar pattern.

Explore How the Platform Handles This

Every two years, midterms reshuffle who holds power in Washington. What doesn't change is how much Washington touches corporate America. Companies keep lobbying, government contracts keep getting awarded, and members of Congress keep disclosing their trades, whichever party comes out ahead on November 3.

The Sector Weighted DC Insider Strategy on Surmount is built around that idea. Instead of trying to call an election, it applies fixed rules to publicly available political-activity data.

How the strategy works:

• Three political data inputs. It tracks companies with significant corporate lobbying, government contracts, and congressional stock trading activity.

• Anchored to the S&P 500. The portfolio is weighted to match S&P 500 sector allocation, the same index behind every stat in this article.

• Monthly rebalancing. It rebalances at the start of each month on a set schedule, not in response to headlines.

• Rules, not reactions. The criteria are defined in advance, the same discipline described in the section on testing a midterm election trading strategy.

• No-code access. Surmount lets users view a strategy's logic and connect an existing brokerage account without writing code.

Risks to weigh alongside these features:

• Political-activity data is disclosed with delays, and past congressional trading or lobbying activity doesn't indicate future results.

• Sector-matched weighting doesn't remove market risk. The strategy can lose value, including during midterm-year drawdowns like those described above.

• Rules-based approaches can underperform in some market conditions, and no strategy is guaranteed to meet its objective.

Explore the Sector Weighted DC Insider Strategy →

This content is for informational purposes only and is not investment advice. All investing involves risk, including possible loss of principal. Past performance does not guarantee future results. [Insert required adviser disclosure, e.g., the entity that manages the strategy and its SEC registration, per Tanya's standard language.]

Frequently Asked Questions

Does the stock market go up after midterm elections?

Historically, yes: the stock market after midterm elections has gained an average of 16.6% over the following 12 months since 1950. Past patterns don't guarantee future results, though.

Why is the midterm election year stock market so volatile?

Uncertainty over which party will control Congress tends to weigh on sentiment. Midterm years have seen an average 17.5% peak-to-trough decline since 1950, deeper than in other years of the cycle.

What is the presidential election cycle?

It's a theory popularized by Yale Hirsch in 1967 that divides each presidential term into four years. Historically, the midterm year has been the weakest and the pre-election year among the strongest.

How does a divided government affect stocks?

Split control often means fewer major policy changes, which some investors see as stability. RBC Capital Markets data shows average annual S&P 500 returns of 14% under a split Congress since 1932.

Can stock market seasonality be tested with rules?

Yes. Systematic investors use rules-based investing to define criteria in advance and test them across every available cycle. With fewer than 20 midterms since 1950, small samples remain a real limitation.