Election years naturally bring uncertainty. Headlines grow louder, campaign rhetoric intensifies, and investors often wonder whether changes in Washington will affect their portfolios. Midterm elections can feel especially uncertain because control of Congress—and the legislative agenda for the next two years—may be at stake.
Historically, the president’s party has often lost seats during midterm elections, raising questions about taxes, spending, regulation, trade, and energy policy. Markets typically anticipate some political change before Election Day, but the size of the shift and how much new policy can realistically be enacted remain difficult to predict.
How Markets Have Performed During Midterm Election Years
Midterm election years have historically produced more modest returns than other years. From 1931 through 2025, the average return during midterm years was 4.7%, compared with 9.5% for all other years. This does not mean midterm years are typically negative, but returns have generally been lower and less consistent.
Election uncertainty also occurs alongside corporate earnings, inflation, interest rates, Federal Reserve policy, consumer spending, and economic growth. These factors often have a greater impact on long-term performance than election outcomes alone.
Why Volatility Often Increases
Market volatility has also tended to rise during midterm election years. Capital Group found that since 1970, midterm years had a median standard deviation of returns of nearly 16%, compared with 13% in all other years.
Campaigns frequently highlight economic and social challenges, while proposed policies may create uncertainty for specific sectors. As investors wait for clarity, they may become more cautious. Elections can therefore amplify normal market uncertainty, even when the long-term investment outlook has not materially changed.
Post-Midterm Market Returns Have Historically Been Strong
One of the clearest historical patterns has occurred after midterm elections. Once the results are known, a major source of uncertainty is removed, allowing markets to refocus on economic and corporate fundamentals.
According to research from Capital Group, the S&P 500 has produced an average one-year return of 15.4% following midterm elections since 1950, compared with 7.8% during other comparable periods. Several post-midterm years were especially strong, including gains of 33.2% after 1954, 27.1% after 1994, 25.1% after 1990, and 20.0% after 2022.
Past performance does not guarantee future results, but the pattern suggests markets have often responded positively as election-related uncertainty faded.
Does Political Party Control Determine Market Performance?
Political control can influence policies affecting individual industries and companies, but it has not been the primary driver of long-term market returns. Markets have produced positive results under unified and divided governments led by both parties.
Over time, corporate earnings, interest rates, inflation, productivity, innovation, and economic growth have generally mattered more than which party controls Washington.
What Midterm Elections Mean for Investors
The practical message is not to ignore elections, but to keep them in perspective. Midterm elections may influence short-term sentiment and volatility, but they are only one factor among many. Moving in and out of the market based on political expectations is difficult and may cause investors to miss recoveries that begin as uncertainty fades.
A disciplined financial plan should already account for elections, recessions, recoveries, and periods of volatility. History suggests that investors who remain diversified, focus on long-term objectives, and avoid emotional decisions impacting their portfolios are generally better positioned to navigate election-year uncertainty and participate when markets recover.
Works Cited:
Ameriprise Financial, “What to Expect from Markets During a Midterm Election Year.”
Capital Group, “Guide to Midterm Elections.”
Capital Group / UBS, “Guide to Investing in an Election Year.”
RBC Wealth Management, “Midterms, the Market and What Matters.”
