With everything happening in the world — from the U.S. push to annex Greenland, to new tariffs against Europe, to military intervention in Venezuela — investors may not be focused on the U.S. midterm elections just yet. But this pivotal contest is 10 months away, and the campaign starts in earnest next month when President Donald Trump delivers the State of the Union Address.
“Trump will use the State of the Union, where he commands a massive audience, to kick off the 2026 campaign,” says Capital Group political economist Matt Miller. “He will lay out a narrative and policy agenda designed to help the Republican Party defy the normal setback that we would expect to see for a president in the midterm elections.”
The key question for investors is: How might the midterms influence the stock market?
1. History suggests lower returns and higher volatility
Capital Group examined more than 90 years of data and found that markets tend to behave differently during midterm election years. Our analysis of returns for the S&P 500 Index since 1930 revealed that the path of stocks during midterm years differs noticeably compared to other years.
2. Post-midterm market returns have been strong
The silver lining for investors is that markets have tended to rebound strongly after Election Day. Above-average returns have been typical for the full year following an election cycle. Since 1950, the average one-year return following a midterm election was 15.4%. That’s nearly twice the return of all other years during a similar period.
3. The Bottom Line for Investors
There’s certainly nothing wrong with wanting your preferred candidate to win, but investors can run into trouble if they place too much importance on election results. That’s because, historically, elections have had little impact on long-term investment returns. Going back to 1933, markets have averaged double-digit returns during various government-control scenarios, including when a single party controlled the White House and both chambers of Congress, a split Congress, and when the president’s opposing party controls Congress.
Midterm elections — and politics as a whole — generate a lot of noise and uncertainty.”
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Click here to read the full article from the Capital Group.
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