Stocks rose after every US midterm elections since 1946. Why that streak may not mean what investors think

The S&P 500 has delivered a positive return in the 12 months following every US midterm election since 1946. Across 20 elections, the average gain was 14.8%, compared with 8.7% for the same period in other years. But this remarkable record does not mean investors can expect another rally after the November 2026 midterms.

US midterm elections have often been followed by strong stock market gains, even when the president's party loses control of Congress. The pattern has survived recessions, wars, political changes and major market crashes. Yet there is an important difference between a historical trend and a reliable investment strategy.

S&P 500 gained after all 20 US midterm elections since 1946

Historical market data shows that the S&P 500 finished higher one year after every midterm election between 1946 and 2022.


The average gain was 14.8%, while the median return stood at 14.2%. For comparison, the average return over similar 12-month periods across all years since 1946 was 8.7%.

The results are notable because the market did not need a favourable election outcome to rise. In 18 of the 20 midterm elections, the president's party lost seats in the House of Representatives. In nine elections, it also lost control of the House, the Senate or both.

The strongest performance came after the 1954 midterms, when the S&P 500 rose 33% over the following year. The market also gained 26.6% after the 1994 elections, when Republicans took control of both chambers of Congress.

The weakest result came after the 1946 midterms. Even then, the index managed a gain of 0.8%.

Why do US stocks often struggle during midterm election years?

Since 1947, midterm election years have delivered an average S&P 500 gain of just 4.6%. That is lower than the average returns recorded during the other three years of a presidential election cycle.

The market also tends to experience larger declines during these years. Historical data shows that the average fall from the market's peak to its lowest point was around 18% in midterm years, compared with roughly 12.5% in other years.

Political uncertainty is one possible reason.

Investors closely follow elections because a change in congressional control can affect government spending, taxes, business regulations and economic policies. Before the results become clear, markets have to account for several possible outcomes.

Why the 12 months after midterm elections have been stronger

Once the results are known, investors have a clearer idea of the political situation for the next two years. Even when the result creates a divided government, the uncertainty surrounding the election begins to fade.

Some investors also believe that political gridlock can be favourable for markets. When different parties control the White House and Congress, passing major legislation becomes more difficult. This can reduce concerns about sudden changes in taxes, spending and regulations.

The year after a midterm election is also the third year of a presidential term. Historically, this has been the strongest year for the S&P 500 during the four-year presidential cycle.

Between 1947 and 2023, the index recorded an average gain of 16.3% during the year before a presidential election. This compares with 8% in the first year of a presidential term and 4.6% in the midterm year.

Since 1946, the S&P 500 has gained an average of 30.6% in the 12 months following its midterm-year low. The median gain was 32.8%.

The strongest recovery came in 1982, when the index climbed 58.3% over the following year. The market also gained 43.9% after its 1954 low and 43.7% after its 1970 low.

But there is a major problem with using this pattern as an investment strategy.

Investors cannot know when the market has reached its lowest point until prices start recovering. In 2018, for example, the market reached its midterm-year low on December 24, several weeks after the election.

In 2002 and 2022, the lowest levels came in October, before voters went to the polls.

Despite its impressive record, the post-midterm rally should not be treated as a dependable market signal.

First, the sample contains only 20 elections. That is not enough to establish a permanent relationship between elections and stock market returns.

Second, the timing of the measurement matters. The 20-for-20 record uses the last market close before Election Day and compares it with the closing level one year later. Different starting dates can produce different results.

Third, several rallies coincided with economic recoveries, changing interest rate expectations and strong corporate earnings. These factors may have contributed more to market gains than the election results.

The 2022 midterm election is a useful example. Much of the subsequent market recovery came during the 2023 rally in large technology stocks, along with growing expectations that interest rates had reached their peak.