Midterm elections are coming in 2026. Here's what 100 years of data tell us about how stocks may react.

By Jamie Chisholm

The 'midterm curse' means its likely the ruling party will fare badly

U.S midterm elections in 2026 may impact markets

Hopefully most American families managed to avoid politics during their Thanksgiving gathering.

But for investors, political fallout is not so easy to eschew. And going into 2026, markets face the build-up of another election cycle: the U.S. midterms next November.

How might this impact stocks? Harry Colvin, senior market strategist at Longview Economics, has crunched the numbers going back 100 years to see what history shows.

And he's found that markets tend to follow a pattern around midterms. "That is, there's typically a large drawdown in the S&P500 SPX, within the 12-18 months before election day, which is usually a good buying opportunity," says Colvin.

After the election, equities perform well over 3, 6, and 12-month time frames, he adds.

Such equity wobbles ahead of the midterms are logical, Colvin reckons, as investors don't like the uncertainty they create - particularly given their potential to cause policy gridlock and/or slower growth.

"Equally, after the midterms, the uncertainty has been resolved and markets can re-focus on fundamentals, with a clearer view on the policy agenda," he adds.

This time around, investors who welcome the Trump administration's agenda may be especially wary about the outcome. "Historically, they don't go well for the president, whose party typically loses seats in Congress (most notably in the House)," Colvin says.

The trend is known as the "midterm curse", according to Colvin, and happens for any number of reasons - including voter fatigue, stronger turnout from the opposition party, and unpopular policies in the administration's first two years.

Colvin acknowledges that this type of historical market analysis has some drawbacks. Pullbacks typically happen once or twice a year anyway, and may be unrelated to the midterms. In other words, correlation is not the same as causation. "Equally, midterms sometimes occur during (or on either side of) a recession. That also distorts the analysis," he admits.

Still, as the table shows, the observations are interesting. There have been 25 midterms in the last 100 years. Of those, nine have fallen within a year on either side of a recession, shown in grey in the table, and Colvin has excluded those from his analysis.

Of the other 16, twelve were preceded by large pullbacks in the S&P500, of more that 10%, within the year leading up to election day, and the other saw pullbacks of less than 10%. "Of interest, 7 of those 12 pullbacks were 20% or larger, 5 were between 10%-20% ," Colvin notes

Source: Longview Economics. The 2001 recession ended in November 2001 (as per NBER dating). That's one year before the 2002 midterms, so it is included here.

And typically those pullbacks were buying opportunities, with strong average S&P 500 returns after the midterms. "That is, the S&P 500 was, on average, higher by 5.8% after 3 months; 10.5% after 6 months, and 14.8% after 12 months," says Colvin. "Furthermore, the larger the drawdown in the pre-midterm pullback, the larger the 12 month rally post the midterms (albeit the correlation is somewhat loose)," he adds.

In summary, Colvin reckons that volatility in markets before the midterms is likely to be a key buying opportunity if/when it happens in the next 12 months - assuming Longview are correct about the low risk of a U.S, recession.

"Currently we are overweight U.S. equities in our tactical portfolio," he concludes.

The markets

U.S. stock-indices SPX DJIA COMP are slightly higher at the opening bell on Wall Street as benchmark Treasury yields BX:TMUBMUSD10Y trade just below 4.00%. The dollar index DXY is little changed, while Brent oil prices (CL.1) rise and gold futures (GC00) trade around $4,222 an ounce.

   Key asset performance                                                Last       5d     1m      YTD      1y 
   S&P 500                                                              6812.61    2.57%  -1.13%  15.83%   13.57% 
   Nasdaq Composite                                                     23,214.69  2.88%  -3.10%  20.22%   21.79% 
   10-year Treasury                                                     4.003      -8.50  -9.60   -57.30   -26.10 
   Gold                                                                 4221.3     3.90%  5.18%   59.94%   57.87% 
   Oil                                                                  59.08      1.90%  -2.96%  -17.80%  -13.31% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

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The buzz

The New York Stock Exchange and the Nasdaq exchange will close early on Black Friday at 1:00 p.m. Eastern, and the bond market will close at 2:00 p.m.

Action in futures for equity indices and other markets are back underway after an outage at CME (CME) knocked out trading early Friday.

U.S. economic data due Friday include the Chicago Business Barometer for November, released at 9:45 a.m.

President Donald Trump said in a Truth Social post that he would "permanently pause migration" to the U.S. from all "third world countries".

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The chart

Source: Apollo

Since U.S. president Donald Trump's Liberation Day tariff announcement in April, foreign appetite for U.S. assets has been robust, notes Torsten Slok, Apollo chief economist. "This is the reason why the U.S. dollar has been trending higher over the past six months," he says. The chart shows that since May, foreigners have been strong buyers of AI and U.S. fixed income, including credit. "With rates higher for longer and the AI story continuing, foreign demand for U.S. assets will remain strong," Slok adds.

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   GME     GameStop 
   BYND    Beyond Meat 
   AMD     Advanced Micro Devices 
   TSM     Taiwan Semiconductor Manufacturing 
   META    Meta Platforms 
   PLTR    Palantir Technologies 
   AAPL    Apple 
   AMZN    Amazon.com 

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-Jamie Chisholm

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11-28-25 0931ET