If you follow the financial news, you may have seen headlines about the upcoming midterm elections and what they could mean for the stock market.
The second year of a presidential term has historically produced some of the lowest average stock market returns of the four-year election cycle.¹ Those years have also tended to bring higher volatility.²
But 2026 hasn’t followed that script so far. The S&P 500 is up double digits this year.³
That contrast raises an important question: What can election-year history really tell us about the market—and what should investors do with that information?
The historical pattern
Since 1950, the S&P 500 has averaged a return of 4.9% during midterm election years. That’s a positive average, but it’s the weakest performance among the four years in the presidential cycle.
The 12 months following midterm elections have looked stronger in the historical data, with stocks gaining an average of 14.5%.¹
One possible explanation is that uncertainty about government policy can affect investor expectations. Before an election, people may wonder whether taxes, regulations, government spending, or other policies could change. Once the results are known, some of that uncertainty may ease.
But that’s only one possible explanation—not a reliable recipe for predicting what markets will do. Stock prices respond to many forces, including corporate earnings, interest rates, inflation, economic growth, and investor expectations. Political developments are part of the picture, but they are not the whole picture.
And what about which party wins? Historical performance has been positive under both Republican and Democratic administrations. That’s another reminder that the stock market doesn’t move in a simple, predictable way based on which party holds power.
Averages can hide a lot
There’s a catch with historical averages: they can make a wide range of outcomes look deceptively predictable.
Midterm-year returns have varied dramatically. Some have involved losses of more than 25%; others have brought gains approaching 40%.¹ Those outcomes are very different, even though they’re all included in the same average.
Think of it like the weather. If October is usually rainy, that may tell you something about what conditions are often like. It doesn’t tell you whether it will rain on a particular Saturday—or whether you should cancel your plans. An average describes a group of past outcomes. It doesn’t reveal exactly what will happen next.
The same is true of election-year market statistics. They can describe what happened in the past, but they can’t tell us with certainty what the market will do this year, next month, or after the votes are counted.
That distinction matters because market statistics can sound more precise than they really are. A single average may leave out the range of outcomes, the economic conditions surrounding each election, and the reasons markets moved as they did. It can also tempt people to make decisions based on a calendar pattern that may not repeat.
What can investors focus on instead?
If history can’t reliably forecast the market around an election, it may be more useful to focus on the parts of a financial plan that can be reviewed and adjusted as life changes:
- Time horizon: When might you need to use the money? A goal that’s several decades away may call for different planning considerations than an expense coming up soon.
- Savings habits: How much are you regularly setting aside toward your goals? Over time, the amount saved can be an important part of making progress.
- Diversification: Is your financial plan overly dependent on one investment, sector, or area of the market? A diversified approach is designed to avoid relying entirely on a single source of returns.
- Risk tolerance and capacity: How would a market decline affect your finances—and how might it affect your ability or willingness to stay with a plan? Those are worth discussing as part of an overall financial picture.
- Your goals: What is the money intended to support—retirement, a home purchase, education, or something else? The purpose of the money helps shape the planning conversation.
These aren’t one-time questions. A job change, a new family responsibility, a major purchase, or a shift in retirement plans could all make it sensible to review your financial picture. The aim isn’t to react to every headline. It’s to make sure your plan still reflects your circumstances and priorities.
Elections can create plenty of noise, and it’s natural to wonder how the results might affect the markets. But historical averages are not promises, and political forecasts are not a substitute for a personal financial plan.
The more useful conversation may be less about guessing what Washington—or the stock market—will do next, and more about whether your current plan is built around your goals, time horizon, and financial circumstances.
Sources
- Fidelity, 2026 [URL: https://www.fidelity.com/learning-center/trading-investing/the-surprising-truth-about-midterms-and-stocks]
- CNBC, 2026 [URL: https://www.cnbc.com/make-it/2026/10/09/midterm-elections-stock-market.html]
- Federal Reserve Bank of St. Louis, 2026 [URL: https://fred.stlouisfed.org/series/SP500?cosd=2026-01-01&coed=2026-10-27]
