With the 2026 midterm elections on the horizon, now is a critical time to understand how political cycles have historically shaped market behavior. Our strategic partners at Capital Group examined more than 90 years of data and found that markets tend to behave differently during midterm years.

Here are 5 key takeaway’s worth noting:

1. The president’s party typically loses seats in Congress – and markets know it.
Midterm elections occur at the midpoint of a presidential term in November, and they usually result in the president’s party losing ground in Congress. Over the past 23 midterm elections, the president’s party lost an average 27 seats in the House of Representatives and three in the Senate. Only twice has the president’s party gained seats in both chambers.

2. Market returns tend to be muted in midterm years.
Since markets have typically gone up over long periods of time, the average stock movement during an average year should steadily increase. But we found that in the initial months of midterm election years, stocks have tended to generate lower average returns and often gained little ground until shortly before the election.

3. Volatility has been elevated in midterm election years.
There is no question that election season can be tough on the nerves. Candidates often draw attention to the country’s problems, and campaigns regularly amplify negative messages. Policy proposals may be unclear and often target specific industries or companies.

4. Markets usually bounced back strongly after elections.
The silver lining for investors is that markets have tended to rebound strongly after Election Day. As we have seen, markets typically rally shortly after midterm elections. History also shows that this isn’t just a short-term blip: Above-average returns are typical for a full year following the 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.

5. Control of Congress has had little impact on investment returns.
There’s nothing wrong with wanting your preferred candidates 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 scenarios, including when a single party controlled the White House and both chambers of Congress as a “unified government,” a split Congress, and when a president’s opposing party controls Congress.

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