Just as every season brings change to nature, market cycles bring both challenges and opportunities. Election seasons can feel like especially windy weather—lots of noise, shifting forecasts, and the occasional headline that makes you wonder if you should board up the windows.
With the 2026 midterm elections approaching, it’s natural for investors to ask what the results might mean for taxes, spending, and regulation. Before drawing conclusions (or making big portfolio moves), it can help to step back and ask a calmer question: What does history suggest typically happens around midterm elections?
A quick look at the midterm track record
Looking across the 19 U.S. midterm elections from 1950 through 2022, one data set often referenced shows an interesting pattern in average S&P 500 price returns measured from late October (used as a proxy for Election Day):
- 3 months prior:+7.9%
- 3 months after:-0.8%
- 6 months after:+14.8%
- 12 months after:+16.6%
In other words, the market has frequently delivered stronger results in the months following midterms than in the immediate run-up—often interpreted as a sign that uncertainty fades when outcomes become known (even when investors don’t love the outcome).
Important note:Past performance is not a guarantee of future results. Any historical pattern can break, especially when valuations, inflation, interest rates, or global events change the backdrop.
Why the “uncertainty discount” matters
Campaign seasons produce a steady stream of proposals, counterproposals, and “here’s what I’ll do on Day One” promises. Markets don’t love unknowns, so the months leading up to an election can carry an “uncertainty discount.” Once the vote is over, investors can begin pricing what is more likely to happen versus what was merely said on a debate stage.
This year, affordability has become a prominent theme—right down to the electricity costs voters increasingly associate with data centers. And yet, campaign rhetoric and enacted policy often take different paths once governing begins.
A long-term reminder (with a timely example)
One reason we caution against repositioning a portfolio around election results is simple: Congress changes hands every few years, but the drivers of corporate earnings tend to play out over decades.
Take artificial intelligence and the race to build the infrastructure behind it. Demand for AI workloads has been growing quickly, while the physical capacity—power, chips, data centers, and connectivity—takes time to expand. Even if political opposition slows some projects, that may change the tempo of the buildout more than the direction of innovation. In some cases, slower buildouts can even reduce the risk of overexpansion.
The practical takeaway
Elections matter. Policies can influence specific industries and near-term sentiment. But for long-term investors, the bigger questions usually remain the same:
- Is your plan aligned with your goals and time horizon?
- Is your portfolio diversified in a way that fits your risk tolerance?
- Do you have a strategy for volatility—before it arrives?
If you’re feeling tempted to make major changes based on headlines, it may be a good moment for a planning conversation. Sometimes the most valuable move is not a clever trade, but a steady hand.
Source for historical figures: FactSet, S&P Global, and Alger (average S&P 500 Index price return around midterm elections from 1950–2022).