What the Last 20 Midterm Elections Tell Us About the Stock Market and What May Be Different After the 2026 Election

Midterm elections often create uncertainty for investors, especially when the incumbent president’s party loses control of Congress. In 2026, that question is no longer theoretical. In the November 3 midterms, Democrats won control of both the House and the Senate, with projections showing more than 250 House seats and at least 54 Senate seats as of November 5.[1] President Donald Trump will face a Democratic Congress for the final two years of his term beginning in January.

History has generally been favorable for the stock market following midterm elections. However, this election arrives alongside a war involving Iran, oil in the high $90s, a $2 trillion federal deficit, a Federal Reserve that has returned to raising interest rates, and a stock market heavily dependent on artificial intelligence.

Looking at the 20 midterm elections from 1946 through 2022, one historical study measuring the market from the last close before Election Day to one year later found the market was higher after all 20 elections, with an average gain of approximately 14.8%.[2]

Market Performance One Year After Each Midterm Election

2026: The one-year measurement period ends in November 2027. Through November 6, the S&P 500 was down about 2.2% from its November 2 close, the last close before Election Day.[3]

These figures demonstrate an interesting historical pattern: despite recessions, wars, inflation, financial crises and political uncertainty, the market was positive over the following 12 months in every one of these 20 historical midterm periods using this methodology.[2]

The record should be kept in perspective. Twenty observations is a small sample, and the figures exclude dividends. U.S. Bank’s research covering 31 midterms since 1900 found an average 12-month gain of 12.4%, with outcomes ranging from losses greater than 30% to gains near 50%, and its testing did not show a dependable midterm effect.[4] A Motley Fool analysis going back to 1874 found the market rose after 32 of 38 midterms, or 84% of the time.[5]

What Happened When the President Lost Control of Congress?

One of the most important questions for investors is whether the stock market reacts negatively when the incumbent president loses control of the House or Senate. History suggests there is no consistent negative reaction, although the gains following these elections have varied widely. The president’s party lost at least one chamber in nine of the 20 midterms studied.[2]

In 1946, President Harry Truman’s Democratic Party lost control of both the House and Senate. The market gained approximately 0.8% during the following 12 months, the smallest gain of the 20 periods.

In 1954, President Dwight Eisenhower’s Republican Party lost control of Congress. The market then gained approximately 33% during the following 12 months as the economy recovered from recession.

In 1986, President Ronald Reagan’s Republican Party lost control of the Senate. The market gained approximately 2.0% over a period that included the October 1987 crash.

In 1994, President Bill Clinton’s Democratic Party lost control of both the House and Senate. Instead of a market decline, the stock market gained approximately 26.6% over the following year.

In 2006, President George W. Bush’s Republican Party lost control of both chambers of Congress. The market gained approximately 10.2% during the following 12 months, although the housing and financial problems that eventually led to the 2008 financial crisis were beginning to develop.

In 2010, President Barack Obama’s Democratic Party lost control of the House. The market gained approximately 2.9% during the following year, although investors continued to face concerns about the slow recovery from the financial crisis and Europe’s debt problems.

In 2014, President Obama’s Democratic Party lost control of the Senate. The market gained approximately 4.6% during the following 12 months.

In 2018, President Donald Trump’s Republican Party lost control of the House. The market initially remained extremely volatile because investors were more concerned about Federal Reserve interest-rate increases, trade tensions and slowing global growth. Despite the difficult environment, the market gained approximately 12.3% during the following 12 months.[2]

In 2022, President Joe Biden’s Democratic Party lost control of the House. Inflation and aggressive Federal Reserve interest-rate increases were the dominant concerns for investors. Nevertheless, the market recovered and gained approximately 15% during the following 12 months.[2]

In 2026, President Trump’s Republican Party lost control of both the House and Senate. It is the fifth time in these 80 years that a president’s party has lost both chambers in a midterm.

The nine earlier periods in which the president’s party lost at least one chamber averaged a gain of approximately 11.9%, compared with approximately 17.2% for the other 11 midterms. The four earlier losses of both chambers averaged approximately 17.7%, but ranged from +0.8% to +33.0%. These averages are calculated from the study’s annual figures and are based on very few observations.

Did Markets React Immediately?

The answer is not consistently.

The first days after the 2026 election illustrate the point. On November 4, the Dow rose 3%, its largest post-midterm daily gain since 1982, and the S&P 500 rose 1.58%, as a decisive result reduced concerns about a prolonged election dispute.[6] On November 5, the S&P 500 fell 4.36% and the Nasdaq Composite fell 5.52%, its close leaving the index more than 10% below its recent high.[7] For the week, the S&P 500 lost 2.7%, the Nasdaq lost 3.4% and the Dow lost about 0.9%.[3]

The stock market does not appear to follow a simple rule that says a president losing Congress automatically causes stocks to rise or fall. In many cases, larger economic forces were far more important than the election result.

The 1974 midterm occurred during an oil crisis, high inflation and recession. The 1982 midterm occurred during a severe recession followed by a powerful economic recovery. The 2002 midterm came after the technology bubble burst and in the aftermath of the September 11 attacks. The 2018 and 2022 midterms were heavily influenced by Federal Reserve interest-rate policy and inflation concerns. The 2026 midterm is taking place amid an AI investment boom, an oil shock, rising interest rates and two overseas wars.

This suggests that while elections can influence investor sentiment and policy expectations, interest rates, inflation, economic growth, corporate earnings and major global events often have a greater impact on market performance.

What Is Different in 2026?

Artificial intelligence and market concentration. The market has rarely depended so heavily on one investment theme. As of November 3, nearly $32 trillion had been added to S&P 500 market value since ChatGPT’s release, and more than half of that gain came from 10 AI-linked companies.[8] Sell-side estimates put 2026 capital spending by five U.S. hyperscalers at $697 billion, with AI capital spending reaching an estimated 93% of their operating cash flow, up from 33% in 2023.[9]

The election became directly connected to this trade. Voters considered 41 ballot measures to slow data center construction and approved most of them, while several winning gubernatorial candidates campaigned on restricting development. Texas alone represents an estimated 27% of planned data center capacity.[10] On November 5, a closely watched chipmaker index fell 12.3%, its worst day in roughly six and a half years, and about $2.5 trillion in Nasdaq market value was erased.[11] These are concerns about future policy, and much of the risk lies at the state and local level rather than in Washington. Corporate fundamentals have remained strong so far, with S&P 500 earnings expected to grow about 31% for the third quarter.[12]

The federal deficit. The federal deficit reached $2.0 trillion in fiscal 2026, $218 billion more than the prior year. Interest on the national debt rose $115 billion, or 11%, and debt held by the public reached $32.4 trillion.[13] Gross national debt has passed $40 trillion, and annual interest costs now exceed national defense spending.[14] Treasury yields fell after the election, partly on expectations that it could restrain government borrowing.[6] Even so, the 10-year yield ended last week near 4.87% and the 30-year near 5.28%.[15] Divided government may limit new spending or tax legislation, but it does not by itself address the long-term gap between spending and revenue.

The Iran war and oil. The war between Iran and the U.S.-Israel coalition began in late February and has disrupted the Strait of Hormuz, through which more than 20% of the world’s oil trade passes. The International Energy Agency has described the effect as the largest supply disruption in the history of the global oil market.[16] Brent crude was near $97.57 on the morning of November 9, roughly 35% above its pre-war level of about $72.[17] President Trump said on November 8 that new strikes were highly unlikely as long as negotiations progressed, but attacks on shipping have continued.[18] A credible reopening of the Strait could ease inflation pressure, while renewed fighting could reverse the recent decline in oil prices.

The war in Ukraine. The war is nearing its five-year mark. U.S., Russian and Ukrainian negotiators are scheduled to meet in Abu Dhabi beginning November 10, the first three-way round since February, with security guarantees expected to dominate the agenda.[19] The two sides remain far apart, Russia rejects a general halt in hostilities, and Russian strikes on Ukraine’s power system have intensified as winter approaches.[19] For investors, the most direct channels are European energy prices, defense spending and overall geopolitical risk. An agreement would be welcome news, but markets have seen earlier rounds of talks end without one.

Inflation and the Federal Reserve. This may be the most important difference from many past post-midterm rallies. Under Chair Kevin Warsh, the Fed raised its benchmark rate in September for the first time in three years, then held it at about 3.9% in October, with two officials voting for another increase.[20] Consumer prices rose 3.7% over the 12 months through September, driven in part by oil, while core inflation was 2.6%.[21] October payrolls rose 165,000, well above expectations, and unemployment fell to 4.1%, leaving a December 8-9 rate increase about 75% priced in by markets.[15] By contrast, part of the gain after the 2022 midterm came from expectations that interest rates had peaked.[2]

Divided government and a higher starting point. Some strategists note that gridlock has historically been viewed favorably because it reduces the chance of major policy changes.[22] U.S. Bank’s data offers a more cautious view: a Republican president with a Democratic Congress has produced an average three-month return of 1.19%, about one percentage point below the average for all periods, and it does not consider these political differences a reliable signal.[4] The market also entered this election after a strong run, with the S&P 500 returning 12.1% in the prior 12 months, compared with an average of 2.9% ahead of past midterms.[4] Historically, a weak period before the election has given markets more room to recover.

The Bottom Line

The historical record of the last 20 midterm elections is surprisingly strong. Using the same measurement period, the market was higher one year after every midterm election from 1946 through 2022, producing an average gain of approximately 14.8%.[2]

Even when the incumbent president’s party lost control of Congress, history does not show a consistent immediate negative reaction from the market. In several cases, markets produced strong gains during the following year, while in others the gains were modest.

That does not mean the same thing will happen after the 2026 midterm election or any future one. Past performance is not a guarantee of future results. Each election occurs in a different environment, and this one includes unusual concentration in AI-related stocks, a large and growing federal debt, an unresolved war affecting global oil supplies, continued fighting in Ukraine and a Federal Reserve that may raise rates again. Investors should continue to focus on the factors that have historically mattered most: the economy, inflation, interest rates, corporate earnings and investment valuations.

Footnotes and Sources

[1] CNN, 2026 Midterm Election Results, November 5, 2026. Seat totals are projections and some races remained uncalled.

[2] Dave Manuel, Stocks After Midterm Elections: 80 Years of Data. The study measures the S&P 500 and its predecessor index, price only, from the last close before each midterm Election Day to the close one year later. It reports an average gain of approximately 14.8% across the 20 midterm elections from 1946 through 2022.

[3] CNBC, Stock market close, November 2, 2026 and November 6, 2026 market recap; Open Outcry, Weekly Market Wrap Up, week ending November 6, 2026. S&P 500 closes of 7,541.40 and 7,376.86.

[4] U.S. Bank, How Midterm Elections Affect the Stock Market, November 5, 2026

[5] The Motley Fool via Stacker, The Midterms Are Coming, October 8, 2026.

[6] CNN, Dow Has Best Post-Midterm Elections Day in 44 Years, November 4, 2026.

[7] CNBC, Stock Market News for November 5, 2026 and November 6, 2026 market recap.

[8] Bloomberg, AI Has Taken Over Every Corner of the Market, November 6, 2026.

[9] J.P. Morgan Asset Management, The AI Investment Boom Is Reshaping Stock Market Winners, June 15, 2026.

[10] Fortune, Wall Street’s Best Post-Midterm Rally in 44 Years Lasted Just One Day, November 5, 2026, citing Wells Fargo for the Texas estimate.

[11] CNN, Stock Markets Plunge as Massive Tech Sell-Off Wipes $2.5 Trillion, November 5, 2026.

[12] CNBC, What to Watch in the Week Ahead, November 6, 2026, citing FactSet.

[13] American Action Forum, CBO: FY 2026 Budget Deficit Totaled $2 Trillion, citing the Congressional Budget Office, October 8, 2026.

[14] Committee for a Responsible Federal Budget, CBO Estimates $2.0 Trillion Deficit for First 11 Months of FY 2026, September 9, 2026.

[15] InvestmentNews, October Jobs Report Beats Forecasts, Lifting December Fed Hike Odds, November 6, 2026.

[16] Wikipedia, 2026 Iran War Fuel Crisis, citing the International Energy Agency.

[17] Reuters via News Beep, November 9, 2026; GlobalSecurity.org, Iran War 2026 Update, November 7, 2026.

[18] The National, Oil Slumps as Trump Plays Down Prospect of New US Attacks on Iran, November 9, 2026.

[19] Associated Press via WQDR, November 9, 2026; NPR, Europe to Join U.S.-Brokered Ukraine Talks, November 8, 2026.

[20] Associated Press via PBS NewsHour.

[21] Charles Schwab, Divided Fed Chooses Patience, Leaves Rates Unchanged, October 28, 2026.

[22] Fidelity, 2026 Midterm Elections: What’s Next?, November 5, 2026.