Stock Market Trends Around Midterm Elections
Historical data suggests that U.S. stock markets tend to perform better during election months, with a notable increase in November of election years compared to non-election years.
Historical analysis indicates that U.S. stock markets generally experience gains during election months, particularly in November. According to a report by Morningstar, stocks have risen by an average of 2.4% in November of election years since 1926, compared to just 0.9% in non-election years. Dan Lefkovitz, a strategist for Morningstar Indexes, noted that elections provide closure, which helps reduce market uncertainty.
While the stock market typically sees weaker returns in midterm years, this year may be an exception, with the S&P 500 reportedly up about 12% as of late October. Further analysis from Fidelity shows that stocks tend to perform better in the year following midterms, gaining an average of 14.5% compared to 4.9% in the year leading up to the elections.
The question of whether a unified or divided government is better for the stock market has also been explored. Morningstar's findings suggest that stocks perform better under a unified government, with average monthly gains of 1.2%, compared to 0.7% under a divided government. This challenges the common belief that a divided government is more favorable for market performance.
As the 2026 midterm elections approach, concerns about potential chaos at polling places and uncertainty surrounding election results could impact market stability. Analysts warn that any significant uncertainty could lead to increased market volatility. Lefkovitz advised investors to remain optimistic, suggesting that patience is key during uncertain times.