Historical Data Shows Stocks Rebound After Midterm Elections

Investors are increasingly concerned about the November 3 midterm elections, with recent surveys showing that nearly half of retail investors fear the outcome will impact their portfolios. Morgan Stanley Wealth Management’s quarterly pulse survey, conducted between October 1 and 23, found that 48% of 953 U.S. investors cited the midterms as a source of worry. A separate study by the Nationwide Retirement Institute, which polled 2,029 investors with at least $10,000 in investable assets from August 24 to September 11, reported that 56% of respondents feel more anxious due to the upcoming vote. Furthermore, 75% of those surveyed believe the results could materially affect their long-term financial plans.

John Mullen, CEO of Parsons Capital Management, noted that the midterms have dominated client conversations this summer and fall. His firm, ranked 25th on CNBC’s Financial Advisor 100 list for 2026, serves clients in Providence, Rhode Island. The political stakes are high, with Democrats holding a roughly 9-point lead over Republicans on the generic ballot as of October 28, according to polling data from FiftyPlusOne. DecisionDeskHQ forecasts that Democrats are also narrowly favored to win the Senate. A shift in control would end the unified government currently in place during President Donald Trump’s second term.

Historical analysis suggests that market volatility tends to rise in the months leading up to midterm elections. Capital Group data shows that median annualized volatility during midterm years since 1970 has been nearly 16%, compared to 13% in other years. However, the S&P 500 has generally performed well after the vote. Michael Townsend, managing director of legislative and regulatory affairs at Charles Schwab, found that the index averaged a 5.7% return in the three months following midterm elections since 1974. Over the six-month period, the average return was 12.4%, with positive gains in all 13 years analyzed.

The structure of government also influences market performance. Janus Henderson’s review of the S&P 500 over the past 50 years indicates that annualized price returns are similar under unified and divided governments. Returns averaged 8.73% under unified control and 9.24% under divided control. Seth Meyer, global head of client portfolio management at Janus Henderson, argued that gridlock may actually benefit the economy by insulating voters from ambitious single-party agendas. He wrote, "In short, gridlock may be good."

Broader economic indicators have shown mixed results after midterm cycles. Sung Won Sohn, a finance professor at Loyola Marymount University, analyzed 19 cycles from 1950 through 2022. Economic growth accelerated in nine of those cycles, slowed in nine, and remained flat in one. Inflation declined in 11 of the post-midterm years but rose in eight. The average inflation rate slipped slightly from about 3.63% in midterm years to 3.56% the following year.

Current market conditions differ from past cycles. The S&P 500 posted a total return of 14.17% through October 28, 2026. This follows an 88.11% total return from the start of 2023 through the end of 2025, which itself reversed an 18.11% loss in 2022. Fidelity Investments data from 1950 through 2023 shows that average returns in the year following a presidential election, which includes midterms, were 3.4%. The year after the midterms typically sees higher returns, averaging 14.7%.