What happens to markets during election years, and what can history teach investors? More than 90 years of market data uncover how U.S. midterm elections have historically influenced investor sentiment and market performance. There is a consistent theme: while elections may create headline-driven anxiety, markets have demonstrated resilience over time, regardless of political outcomes.

Investing through midterm elections: five historical takeaways

1. The president's party often loses seats

Historically, the party in power tends to lose congressional seats during midterm elections. Since this trend is widely anticipated, markets often price in the potential shift well before Election Day. Political turnover is common and rarely a surprise to markets.

2. Returns tend to be softer during midterm years; volatility typically increases

Since 1931, the S&P 500 has averaged 4.7% returns during midterm election years and 9.5% returns during all other years. Markets often pause amid uncertainty early in the year before stabilizing later in the cycle. Short-term uncertainty can create slower market momentum, but remaining invested has historically been rewarded.

Midterm election years have historically experienced higher market volatility, particularly in the months leading up to Election Day. Increased fluctuations are normal during election cycles and should be expected, not feared.

3. Markets have historically rebounded after elections

Markets have often rallied following midterm elections. Since 1950, the average one-year S&P 500 return following a midterm election has been 15.4% compared to 7.8% during comparable non-midterm periods. Political clarity after elections has historically supported stronger market performance.

4. Long-term returns have been strong regardless of political control

Historical data shows markets have produced positive long-term returns under:

  • Unified government
  • Split Congress
  • Opposing-party control

Corporate earnings, economic growth, innovation, and long-term fundamentals have historically mattered more than election outcomes. Political events can influence short-term market sentiment, but they have historically had limited impact on long-term investment outcomes.

5. Discipline beats prediction

Rather than attempting to predict election results or time markets, investors are generally better served by maintaining diversification, staying aligned with long-term goals, rebalancing thoughtfully, and remaining disciplined. For long-term investors, perspective and consistency have historically driven better outcomes than political predictions.

Election cycles are temporary. Financial discipline is timeless.

Historical market performance does not guarantee future results. Investing involves risk, including possible loss of principal. Source: Capital Group, Guide to Midterm Elections (2026). Wondering how to position your portfolio through this cycle? Let's connect.