The midterm results are (mostly) in. So, what should you expect NEXT in the markets?
I think you’ll find my MoneyShow Chart of the Day revealing. It shows how the S&P 500 Index (^SPX) performed on average following midterm and presidential elections from 1980 through 2024. The big takeaway? No matter if Republicans or Democrats end up in control of one or both houses of Congress (or the White House in presidential years), markets tend to rally once Election Day is in the rear-view mirror!
Source: CNBC
Just because something happened in the past, it doesn’t mean the same thing will happen in the future. But taking into account ALL the midterm cycles tracked by CNBC, average S&P returns came to 1% over the next week, 1.5% over the next month, and 13.7% over the next year. Markets were trading in positive territory 12 months later 100% of the time.
Digging a little deeper, markets DO tend to favor a “dividend government” outcome. The S&P typically rose 15% over the next year when midterm and presidential elections resulted in one party controlling the White House and another controlling the House, the Senate, or both. That compared to an average return of 11.5% when one party ended up with an across-the-board win.
Bottom line: Elections eliminate uncertainty. Once the votes are tallied, investors can re-focus on underlying trends in the economy, corporate earnings, and interest rates. And based on the historical record, that could mean a nice finish to 2026 – and a potentially positive year ahead!
