In the 12 months before midterm elections, U.S. stocks have returned an average of just 2.9%, compared with 8.9% across all years. In the 12 months after, they have averaged 12.4%. With the November 3, 2026 midterms 29 days away, investors are asking whether that pattern can be trusted. Plus500 looks at what 100+ years of data shows, including how markets have behaved in the final month before the vote, and where the pattern breaks down.

TL;DR

• U.S. stocks averaged 2.9% in the 12 months before midterm elections vs. 8.9% in all years.
• The 12 months after midterms have averaged a 12.4% return, but the pattern is not mechanically reliable.
• In 2018 and 2022, negative midterm-year returns were driven by Fed rate hikes, not the elections themselves.
• Macro fundamentals, earnings, rates, and inflation consistently matter more than which party wins.
• J.P. Morgan data shows markets begin rallying just under a month before election day, averaging +6.6% in the election quarter.
• With the November 3, 2026 midterms approaching, uncertainty itself, rather than the election result, has historically been the key market variable.
• Past performance is not indicative of future results.

What Are Midterm Elections?

Midterm elections are U.S. general elections held two years into a president's four-year term. The presidency isn't on the ballot. Voters decide control of Congress.

On the ballot:

• All 435 House seats
• About one-third of the 100 Senate seats
• Many governorships and state offices

When: The Tuesday after the first Monday in November of even-numbered years between presidential elections (2022, 2026).

Why they matter: Congressional control decides which laws pass and which presidential proposals advance. A president whose party loses Congress faces divided government and a harder legislative path.

Key fact: The president's party historically loses seats in midterms, so they work as a referendum on the president.

The Next Midterm Elections: When Is the Next Round?

The next midterm election is scheduled for Tuesday, November 3, 2026.

The Pattern: Underperformance Before, Strength After

While past performance does not reflect future results, the most consistent finding in the historical data is not what happens on election day itself, but rather the arc of returns surrounding it. According to J.P. Morgan Asset Management's Global Market Strategist Meera Pandit, S&P 500 returns in midterm election years have averaged 9.2% since 1937, compared with 13.3% in non-midterm years. Realized volatility has also run higher during these periods, suggesting that political uncertainty has a measurable, if not dramatic, effect on investor behavior.

U.S. Bank Asset Management Group's research, drawing on Bloomberg data covering 31 midterm elections between 1900 and 2025, reinforces this picture. In the 12 months before midterm elections, U.S. stocks produced an average return of just 2.9%, well below the 8.9% average for all years. Yet in the 12 months following those same elections, markets delivered an average return of 12.4%. That reversal is striking, and it has helped fuel a widely held assumption that midterms represent a buying opportunity.

J.P. Morgan's analysis adds further texture to the timing. Average returns were slightly negative in each of the three quarters preceding a midterm election, before markets jumped an average of 6.6% in the fourth quarter, the period in which the election itself falls.

Moreover, history shows that markets begin to rally just under a month before election day, suggesting that investors start pricing in the reduction of uncertainty well before results are confirmed.

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Why the Averages Deserve Caution

Despite the apparent clarity of these patterns, the statistical foundation is less solid than it might appear. The U.S. Bank's research team found that statistical t-tests did not show midterm elections consistently changing returns, the differences were not large or consistent enough to establish a reliable election effect. Perhaps more importantly, the wide range of historical outcomes, from losses of more than 30% to gains approaching 50%, restricts the conclusions investors can draw from averages alone.

Of the 31 midterm elections studied by the U.S. Bank 11 coincided with major economic developments: inflation shocks, rising interest rates, the Great Depression, war, or financial stress. This overlap is critical to understanding why simplistic election-year rules can mislead. The years 2018 and 2022 were both midterm years that produced negative S&P 500 returns, but those selloffs were triggered by Federal Reserve rate hikes, not the elections themselves. Similarly, 2002 delivered negative midterm-year returns driven by the aftermath of the technology crash. In each case, macro forces dominated electoral noise.

Fidelity's analysis found that markets have historically responded more to changing levels of policy uncertainty than to which party actually wins or loses. The implication is significant: it is the resolution of ambiguity, rather than any particular electoral outcome, that tends to unlock market performance.

Party Control, Divided Government, and the 2026 Landscape

One of the more durable findings in this space is that markets have tended to perform well regardless of which party controls the government. J.P. Morgan points out that the S&P 500 delivered an average annual return of 16.3% during the Obama administration and 16.0% during the first Trump administration, both well above the 30-year average of 10.3%. Markets and the economy, the data suggests, have performed well under all configurations of government, whether divided or unified.

The 2026 midterms are shaping up to be closely contested. As of mid-July, the House stood at 218 Republicans, 212 Democrats, one independent, and four vacancies, while the Senate counted 53 Republicans, 45 Democrats, and two independents caucusing with Democrats. That configuration has historically been associated with legislative gridlock but also, paradoxically, with periods of reasonable market performance.

Morgan Stanley's Head of Policy and Geopolitical Strategy, Monica Guerra, has identified affordability as likely to be a defining issue in the 2026 cycle. Cost pressures and softer consumer sentiment point to a challenging backdrop for the incumbent party, with technology and energy emerging as key sectors carrying significant policy implications depending on the outcome.

2026 in Its Own Context

What makes the current cycle particularly interesting is that it has already deviated from historical norms. Fidelity notes that 2026 returns have strayed from typical midterm patterns, with stocks showing resilience despite concerns about higher oil prices, U.S. tariffs, and the prospect of further rate increases. That divergence is a reminder that each election cycle is embedded in a distinct macroeconomic environment, and that historical averages are guides, not guarantees. Fidelity's research underlines the broader structural point: corporate earnings, business investment, and economic conditions have historically been more important drivers of long-term returns than electoral outcomes.

Schwab's Townsend has noted that near-term volatility is expected as the election approaches, but that investors should remain focused on long-term goals rather than attempting to time the market around electoral outcomes.

BlackRock has similarly highlighted that markets tend to perform well after elections reduce uncertainty, a finding that aligns with the broader historical evidence but that also depends heavily on the economic conditions prevailing at the time.

Reading the History Clearly

The historical record on midterm elections offers a genuinely useful framework, but one that demands careful interpretation. The tendency for markets to struggle before elections and recover afterward is real and documented across more than a century of data. Yet it is not mechanically reliable, and it is frequently overwhelmed by forces that have nothing to do with ballot results.

For traders and investors approaching the 2026 midterms, the most honest reading of the evidence is that uncertainty itself, rather than any specific political outcome, is the primary market variable. As that uncertainty resolves, history suggests conditions for stronger performance may improve. But the range of possible outcomes remains wide, macroeconomic conditions will continue to matter enormously, and no electoral pattern guarantees any particular result. As with all historical market data, past performance is not indicative of future results.

FAQs

When are the midterm elections?

The U.S. midterm elections are scheduled for November 3, 2026.

Do midterm elections affect the stock market?

Yes, but not in isolation. Historical data covering 31 midterm elections from 1900 to 2025 shows that U.S. stocks have tended to underperform in the 12 months before midterms and outperform in the 12 months after. However, statistical analysis has not confirmed a reliable causal link, macro factors such as interest rates, inflation, and corporate earnings have consistently been stronger drivers of returns than electoral outcomes.

What has the S&P 500 historically returned around midterm elections?

According to U.S. Bank Asset Management Group (Bloomberg data, 1900-2025), U.S. stocks averaged 2.9% in the 12 months before midterm elections, vs. 8.9% for all years, and 12.4% in the 12 months after. Separately, J.P. Morgan Asset Management data shows S&P 500 returns in midterm years averaged 9.2% since 1937, vs. 13.3% in non-midterm years.

Does it matter which party wins the midterm elections?

Less than most investors expect. Fidelity's research found markets have responded more to changes in policy uncertainty than to which party wins or loses. J.P. Morgan data shows the S&P 500 averaged 16.3% annually under the Obama administration and 16.0% under the first Trump administration, nearly identical returns across opposite political environments, and both above the 30-year average of 10.3%.

When do markets typically start reacting to midterm election results?

J.P. Morgan Asset Management's data shows markets have historically begun to rally just under a month before election day, suggesting that the market prices in reduced uncertainty in anticipation of results, not just in reaction to them. The fourth quarter of midterm years, when the election falls, has averaged a 6.6% gain across historical cycles.

Is the historical midterm pattern reliable enough to trade on?

No. U.S. Bank's statistical analysis using t-tests found the differences between midterm and non-midterm years were not significant enough to establish a consistent, tradeable pattern. The range of outcomes across 31 elections, from losses exceeding 30% to gains approaching 50%, is too wide to draw firm directional conclusions. Fidelity reinforces this point, noting that corporate earnings, business investment, and economic conditions are historically the more dependable long-term drivers of returns.

This story was produced by Plus500 and reviewed and distributed by Stacker.