Post-election rallies

Stocks have an outstanding track record in years following the midterm elections, delivering an annualized return of 20.3% from 1950 to 2025. Equally impressive, not once in the 19 post-midterm years during that stretch did the S&P 500 decline. And just twice has its annual return been less than 5%, a 2.1% gain in 2011 and a 1.4% gain in 2015.

Since 1990, sectors with the strongest relative performance in post-midterm years are materials (32% vs. 8% for all years), communication services (20% vs. 8%), consumer discretionary (21% versus 11%), and industrials ( 11% vs. -1%).

One factor may contribute to the midterm malaise: investors’ distaste for uncertainty. In the 19 midterm elections since 1950, the president’s party lost seats in Congress 17 times (with an average loss of 24 seats), resulting in an uncertain path for future policies.

Still, investors who weathered the worst midterm downturns have been rewarded for their patience. Following the seven midterm years when the S&P 500 declined, the S&P 500 returned at least 23% the following year, with an average of 29%.