Since the first midterm election in 1874, the S&P 500 has demonstrated a reliable pattern of growth in the year after voters head to the polls. According to a Motley Fool analysis that draws on Robert Shiller’s historic market data, the index climbed in the 12 months following 32 of the last 38 midterms – an 84% success rate – delivering an average total return of 14%.
Why the Trend Matters for Investors
The record suggests that long‑term, fundamentals‑based investing remains a sound strategy, while short‑term trading on election outcomes resembles gambling on prediction markets such as Kalshi. The data show that the market’s performance is not tightly linked to how many seats the president’s party loses or which party ultimately controls Washington.
Pre‑Election Market Moves
In the six months leading up to a midterm, the S&P 500 typically drifts upward, averaging a 4% gain. The month immediately before Election Day adds another modest boost, with an average rise of 1.5% and positive returns in 76% of the cases.
Post‑Election Performance
After the votes are counted, the market’s momentum eases. The month following a midterm sees only a 0.5% average gain, positive just 55% of the time. Larger gains tend to appear later: a 6% average increase three months after the election and a 10% rise six months out, with positive outcomes in 76% and 87% of those windows respectively.
Impact of Government Composition
Divided government – where either the House, the Senate, or both are controlled by a party different from the president’s – has historically produced stronger post‑midterm returns than unified government. A unified Democratic Congress posted the strongest average gain, though that sample covers only eight elections from the Wilson to Carter eras. Under a Republican president, a divided Congress delivered positive returns in 93% of the 14 applicable elections. By contrast, a unified Republican Congress is the only arrangement that has averaged a negative return, but that sample is small and includes years that preceded major financial panics.
Seat Losses and Market Moves
The number of seats the president’s party loses in either chamber shows little correlation with market performance. Whether the House or Senate experiences a landslide loss or a modest shift, the S&P 500’s 12‑month return after the election remains roughly the same.
Takeaway for Investors
For the average American – roughly 150 million of whom hold stock through brokerage or retirement accounts – the historical record offers reassurance. While midterm elections dominate headlines and can create short‑term anxiety, the data indicate that they rarely trigger wild market swings once the political dust settles. Investors would do well to focus on solid, long‑term fundamentals rather than trying to time the market around election cycles.
Original reporting: KEYT (Ventura/Santa Barbara) — read the source article.
