Every time an election comes around, traders, especially those newer to the market, wonder what things will be like in the days, weeks, and months afterward.
Well, here’s an interesting fact for you:
After every single U.S. midterm election since 1950, the S&P 500 has been higher one year later. Every. Single. Time.
That’s 19 consecutive midterm elections! In fact, according to research from Capital Group, the S&P 500 has historically gained an average of approximately 15% in the 12 months following midterm elections.
Most recently, following the November 2022 midterms, the S&P 500 gained about 15% over the following 12 months, extending that remarkable streak.
Now, this doesn’t mean it was a straight shot up from Election Day through the following 365 days. There can be plenty of volatility and significant drawdowns along the way.
One memorable example is the stock market crash of October 1987, which occurred during the 12 months following the 1986 midterm election. Despite that historic crash, the S&P 500 still finished that 12-month period higher.
So, if you’re a longer-term investor looking to buy and hold stocks, this historical tendency is certainly worth knowing about. In theory, buying stocks at attractive prices before or around an election could be fruitful.
But remember, just because something has happened 19 times doesn’t guarantee it will happen a 20th time! You still need to monitor your positions, manage your risk, and be prepared for drawdowns, even if you’re investing for the longer term.
What About the 2026 Midterm Elections?
So what do I suggest as we navigate the 2026 midterm elections and head toward 2027?
First of all, don’t throw your trading plan out the window!
Whatever you’ve been doing that’s been getting you results, even if those results aren’t yet as big as you’d like, doesn’t suddenly become irrelevant because there’s an election. If you’ve been learning to recognize winning setups, make winning trades, and manage your winners and losers effectively, those skills still apply.
You just need to be prepared for the possibility of additional volatility in the election aftermath. And there are certainly some unusual circumstances surrounding this particular election.
President Trump is only the second U.S. president to return to the White House for a nonconsecutive second term, following Grover Cleveland. We’ve also had a change in Federal Reserve leadership this year, ongoing geopolitical uncertainty, and closely contested races that could affect the balance of power in Congress.
That’s a lot of moving parts!
But here’s the thing: I wouldn’t get too caught up in trying to predict exactly what the market will do based on election cycles or which party ends up controlling Congress. Just because Democrats or Republicans win control doesn’t guarantee a particular market reaction.
What If You’re a Short-Term Trader?
If you’re scalping, day trading, or short-term swing trading, news surrounding the election results could certainly cause some pops and sharp market moves. And if we don’t get decisive results on Election Night, uncertainty could continue for several days.
That doesn’t mean you need to sit on the sidelines and avoid trading altogether. You can absolutely look for trading opportunities in the days following the election. But you still need to see your setup!
Don’t get lured into trades just because there’s extra volatility, excitement, or big moves happening in the market. If your setup is there and the trade meets the criteria of your trading plan, great. If not, there’s no reason to force a trade.
Remember, additional volatility can create opportunities, but it can also increase your risk.
And there’s another important point here. Just like with corporate earnings announcements, knowing the outcome of an event doesn’t necessarily tell you how the market will react.
A company can report terrific earnings and its stock can still sell off. Likewise, one political party can win an election, but that doesn’t guarantee the market will move in the direction you might expect.
That’s why I always come back to price action.
Pay attention to what the market is actually doing, not just what you think it should be doing based on the news.
As we head into the election aftermath and eventually 2027, I encourage you to stay focused on your trading plan, manage your risk, and let the market show you what it’s doing.
And I’ll be here navigating these markets right alongside you!
💬 P.S. How Are You Approaching the Midterm Elections?
Are you making any adjustments to your trading plan around the election, or sticking with your usual setups?
Leave a comment below and let me know!
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