Enduring the midterm malaise

A series of events — some surreal, others tragic, and most of the rest unusual — can help explain the stock market’s volatile and somewhat disappointing performance in 2026. But given how stocks have fared in the years of U.S. midterm elections, the performance in 2026 appears rather typical.

Historically, investors have endured rather than embraced midterm-election years. From 1950 to 2025, the S&P 500 Index delivered an annualized total return of 6.3% in midterm years, barely more than half of its return of 11.7% for all years over that period. The S&P 500 posted gains in just 63% of midterm years, versus 79% of all years since 1950. Most recently, the S&P 500 fell 22% in 2022 and 5% in 2018.

The weakness in midterm years is reflected across all 11 of the index’s sectors. Every sector has a lower annualized return for midterm years since 1990 than for all years during that stretch. Given that backdrop, 2026 returns seem impressive.

Curious about what happens in the years after midterm elections? Come back Friday.