Do the midterms matter for your investments?

If you follow the financial news, you might have seen some headlines about the midterm elections

The second year of the presidential cycle has historically produced some of the lowest stock market returns.1

And these periods have also tended to see higher volatility.2

But here’s the funny thing…

So far, 2026 hasn’t followed the script.

The S&P 500 is up double digits this year.3

That’s quite a contrast with what the numbers might lead you to expect.

Which raises some interesting questions…

What does history really tell us about elections and the stock market?

And more importantly, what should investors actually do with that information?

Well, let’s look at the numbers.

Since 1950, the S&P 500 has averaged a return of just 4.9% during midterm election years.

Now, 4.9% might sound like a reasonable return.

But compared with other years in the presidential election cycle, it’s relatively modest.

In fact, it’s the weakest average performance of the entire four-year cycle.

But the 12 months following those elections?

Stocks have gained an average of 14.5%.1

Quite a difference.

Some analysts believe political uncertainty helps explain the pattern.

Leading up to an election, investors worry about potential changes to government policies.

Once the votes are counted, some of those unknowns disappear. Investors have a clearer picture of what to expect from Washington.

And what about which party wins?

Well, history shows that stocks have performed well under both Republicans and Democrats.

That’s because plenty of other factors, from corporate profits to the broader economy, influence stock market returns.

Sounds reasonable, right?

Of course, these are historical patterns, not guarantees of what will happen next.

Every election cycle is different, and there’s no way to know whether stocks will follow the same trends this time around.

Those historical averages also hide some pretty big differences between individual years.

Midterm-year stock returns have ranged from losses of more than 25% to gains approaching 40%.1

Think about that for a moment.

Some midterm years, investors have experienced losses.

Others? They’ve enjoyed gains.

And yet, all those wildly different outcomes get lumped together into one neat little average.

You can think of it like the weather
.
You know November can be a rainy month. But would you cancel all your plans just because there’s a chance of drizzle?
Of course not.

You might end up with a whole weekend of beautiful sunshine!

And that’s the problem with using historical market averages to predict what stocks will do in any particular election year.

They can give us a general idea of what happened in the past.

But there’s an awful lot of variation hiding behind those averages.

So, if we can’t reliably predict what the stock market will do around an election, what should we focus on instead?

I think we’re better off focusing on our own financial plans and the decisions we can actually influence.

After all, elections come and go. But our financial goals don’t suddenly disappear when the votes are counted.

And over time, the decisions we make about our money can have a much bigger impact on our financial future than trying to guess what happens next in Washington.

For example:

• Time horizon: How long will we need to keep our money invested before we need it?
• Savings rate: How much are we regularly putting aside toward our goals?
• Diversification: Are our investments spread across different assets, or are we relying too heavily on one area of the market?
• Financial goals: What are we investing for in the first place? A home? Our children’s education? Retirement?

Of course, our circumstances can change. And when they do, it’s worth taking another look at our financial plans.

Have any questions about the election and what it could mean for your investments? Reach out to our team to schedule a conversation!

Warmly,

Barry

Sources

1. Fidelity, 2026 [URL: https://www.fidelity.com/learning-center/trading-investing/the-surprising-truth-about-midterms-and-stocks]
2. CNBC, 2026 [URL: https://www.cnbc.com/make-it/2026/10/09/midterm-elections-stock-market.html]
3. Federal Reserve Bank of St. Louis, 2026 [URL: https://fred.stlouisfed.org/series/SP500?cosd=2026-01-01&coed=2026-10-27]