The S&P 500 historically experiences strong gains following midterm elections, regardless of the political outcome. Since 1980, the index has averaged a 13.7% increase one year after midterms, with positive returns in every election cycle from 1982 to 2022. Short-term performance tends to be modest, with average gains of around 0.2% one day and one week after elections, and a 1.1% rise after one month when combining presidential and midterm election data.

Market performance tends to be more favorable in scenarios of divided government, where one party controls the White House and the other holds at least one chamber of Congress. In such cases over the past several decades, the S&P 500 surged an average of 15% after one year, compared to an average 11.5% increase under unified party control. Historically, large landslide election results have caused more market uncertainty, as concentrated power can lead to unpredictable fiscal policies.

Despite historical trends, election outcomes are not the sole driver of market returns. Factors like Federal Reserve policy, corporate earnings, and emerging economic themes—particularly the ongoing impact of artificial intelligence—play critical roles in shaping stock performance. For example, the S&P 500 declined sharply after the 2000 election due to the dotcom bust, and Fed rate hikes in 2018 contributed to short-term market declines following a midterm that same year.

Looking ahead after the 2026 midterms, the AI sector remains a key force behind market sentiment, with continued growth potentially sustaining the bull market. However, geopolitical risks involving Iran, rising global bond yields, and possible changes in political control could introduce volatility. While history suggests a favorable environment for stocks following midterms, investors should consider broader economic and policy dynamics shaping the market landscape.