As investors begin looking ahead to the 2026 midterm elections, history offers valuable perspective on how markets have navigated period of heightened political uncertainty. Today’s weekly market commentary examines the historical relationship between midterm election years and subsequent stock market performance, reinforcing the importance of staying focused on a disciplined, long-term approach rather than political headlines.
The enclosed chart goes back to 1978 and runs through to present day, highlighting midterm election years. Each year shows two sets of data. The first, represented by the orange bars, are market corrections during those midterm election years. These calendar-year drawdowns are measured by the largest market drops from peak to trough for each year in the S&P 500 Index. Importantly, these figures do not represent the return of the S&P 500 for those years, rather, they represent the largest intra-year correction. The second set of data, represented by the blue bars, is the return of the S&P 500 Index one year after each correction. Of course, for 2026, we do not yet have a measure of market performance one year after the -9% market correction.
But as the author explains, “since 1978 declines in the S&P 500 Index during midterm election years have been followed by positive returns one year later. Additionally, even if investors do not time the bottom of the correction, the S&P 500 Index has delivered an average return of 5.5% in the year leading up to a midterm election, versus 13.1% in the year after the election.” – WFII Chart of the Week June 30,2026
In terms of what this means for investors, the piece explains in the close, “investors are better positioned to assess the policy landscape and refocus on fundamentals after the election occurs. Drawdowns tied to midterm election uncertainty have historically been moments to consider adding to equity exposure rather than to retreat from it.” – WFII Chart of the Week June 30,2026
We would ask that you review the attached piece at your convenience and please let us know if you have any questions or if you would like to discuss it further. And as we always end this correspondence, please remember that regardless of current momentum and regardless of the key takeaways in this weekly perspective, we will continue to monitor and manage with a thoughtful approach based on your specific long-term objectives.
