Every two years, the same question lands in my inbox: Stephen, what is this election going to do to my investments? It’s a fair question — and the answer might surprise you.
Before we get into the numbers, one ground rule: this is not a political article. I’m not going to tell you how to vote, and we’re not going to talk about red versus blue. We’re going to look at the historical data and what it actually means for your plan.
A Quick Civics Refresher
Congress has two parts — the House and the Senate. All 435 House seats are on the ballot every two years. The Senate rotates about a third of its 100 seats each cycle. Most bills need 60 Senate votes to pass, which means when control is split or margins are thin, big policy changes get a lot harder to push through. Keep that in mind — it matters more than most people realize when it comes to markets.
The Midterm Effect
There’s a well-documented pattern called the midterm effect: the party that holds the White House almost always loses seats in Congress. Over the last 20 midterms, the president’s party lost House seats 18 times. This isn’t a partisan phenomenon — it happens to both parties.
Why? A combination of lower voter turnout compared to presidential years, frustration that builds over the first two years of any administration, and swing voters who simply prefer balance and vote to create a check on whoever is in power.
What the Market Has Actually Done
Here’s the part most people want to know. Since 1950, the S&P 500 — the top 500 companies in the United States — has averaged a 9.7% annual return. But look specifically at the 12 months following a midterm election. The average gain during that window was 15.4%, and it was positive all 19 out of 19 times.
That’s a striking stat. But to be honest with you, averages can hide some painful stretches. The 12 months following the 1986 midterms, for example, the market gained just over 1.3% — because that window ran straight through the crash of October 1987. Other years it was up 20% or more. Nineteen data points is also a relatively small sample. Going further back into the 1800s and early 1900s, markets were up after midterms about 84% of the time — but not every time.
Why Does the Post-Midterm Year Tend to Be Strong?
Two reasons. First, uncertainty goes away. Markets don’t like surprises. Once the votes are counted, investors know what they’re working with. Even if they don’t love the outcome, they can plan around it. Second, gridlock. When Congress is split or margins are thin, big policy swings become harder to pass. Fewer surprises out of Washington means more predictability — and markets like predictability.
What This Means for Your Plan
My honest take: don’t do anything. Don’t make big moves in or out of the market because of a midterm election. Don’t let who’s in the White House determine how you invest. The market doesn’t see red or blue — it sees earnings.
What actually drives your investment results is your income needs, your timeline, and your risk tolerance. Focus on what you can control.
That said, if the headlines are making you nervous, use that as a prompt to check your cash, review your investment mix, and make sure your plan still fits where you are today. If something feels off, that’s worth a conversation.
Call Jones Financial Partners at 405.366.1297 to schedule a portfolio review. We’d be glad to sit down and make sure your plan is built for the long haul — not just the next election cycle.