Once election results are in, here's what investors should focus on next

By Philip van Doorn

It is important to separate your political preferences from your investment and trading decisions

After the election results are in, investors are probably best served by putting their emotions aside and thinking hard about the economy, technology and industry growth opportunities.

Tensions are running high in the U.S. as Americans head to the polls on Tuesday to vote in the 2026 midterm election. But investors who let their politics influence their investment decisions often miss out on golden opportunities to profit.

For example, just because a certain industry is closely associated with one political party or another doesn't mean their shares will behave the way investors expect. Professional investors who spoke with MarketWatch recounted examples where expectations were dashed by actual returns.

Early on Election Day, RealClearPolling's data projected that with all 435 seats in the U.S. House of Representatives in play, the Democratic Party would win 227 seats and the Republican Party would win 180 seats. The remaining 28 seats were considered to be toss-ups, which would make for a Democratic majority even if the Republicans took all the toss-ups.

RealClear's polling was less clear on the outcome for the U.S. Senate. With 35 of 100 Senate seats up for grabs, Democrats were favored to win 47 seats, with Republicans seen as a lock for 44. Nine seats were considered tossups.

Even if Republicans can hang on to their Senate majority, Democrats retaking the House would usher in two years of divided government.

Would a probable change of control of the House - and consequent round of investigations by House committees of various Trump administration officials - please you? Would it upset you? Maybe it shouldn't worry you at all.

Because history suggests that stocks could continue to rise, no matter which side comes out on top. Mark Hulbert compiled stock-market data going back to when the S&P 500 SPX was created in 1957, and found that the index tends to perform "far better in the six-month period following the midterms than in the comparable periods of the other three years of the presidential cycle."

'Once the election is behind us, I expect attention to return quickly to earnings, interest rates and oil. A clear result would help, but it won't resolve those questions.'Joe Tigay, portfolio manager of the Rational Equity Armor Fund

What you should be focusing on

Joe Tigay, who co-manages the Rational Equity Armor Fund HDCAX, wrote in an email to MarketWatch that investors should steer clear of making assumptions based on party labels. Actual policies and, importantly, politicians' ability to see them enacted are often of greater consequence.

Investors make mistakes when "they assume a political winner automatically produces a stock-market winner," Tigay said. "But a company still needs customers, affordable financing and the ability to deliver.

"An energy investment can work because electricity demand is growing, even if the political backdrop looks unfavorable," according to Tigay. He emphasized the importance of getting back to basics. "Once the election is behind us, I expect attention to return quickly to earnings, interest rates and oil. A clear result would help, but it won't resolve those questions."

Continuing on the energy theme, Tigay expects that some of the most meaningful elections will be on the state and local levels. "In places like Texas, I'll be watching what the election means for data-center development, power generation and the infrastructure needed to support AI," he wrote.

Whether or not projects can be approved and the ultimate cost for data centers to get the electricity they need "can matter much more to a company's earnings than the national election headline," Tigay added.

Spencer Lerner, a portfolio manager at Harbor Capital, suggested in the firm's "Midterm Mosaic" report that investors focused on AI should "distinguish businesses dependent on future capacity additions from those monetizing existing capacity," and "ask how permitting, electricity availability and financing costs enter managers' return assumptions."

Those items underscore the importance of local election results, and will "remain relevant after election day, regardless of which party gains seats" in Congress, Lerner wrote.

'Politicians set policy, but oil prices, interest rates, earnings and technology decide where the money goes. That's why I take today's midterms with a grain of salt.'Mark Malek, CIO at Siebert Financial

When asked in an email exchange with MarketWatch about possible misconceptions among investors and traders reacting quickly to election results, Siebert Financial CIO Mark Malek replied that investors often convince themselves that they know how individual stocks and sectors will respond after every election. But most of the time, the market has other plans.

The 2016 election, when Donald Trump first won the presidency, provided a good example. "There was a massive selloff in futures, and I think that S&P futures even hit their limit-down as the results rolled in," Malek noted. But the overnight decline quickly reversed.

The following day, the S&P 500 rose 1.1%, while the Dow Jones Industrial Average DJIA rose 1.4%. "Anyone who panicked and sold in the middle of the night got a painful surprise when the Dow closed higher in the following day's session," Malek said. "The crash everyone braced for never showed up during market hours."

Meanwhile, high-conviction sector bets have fared even worse.

"Oil-and-gas stocks were supposed to struggle" under President Biden, "who canceled the Keystone XL pipeline on his first day [in January 2021]," Malek noted. "Instead, energy XX:SP500.10 was the best sector in the S&P 500 in both 2021 and 2022, and in 2022, it was the only one that finished the year higher.

"Clean energy was supposed to be finished in a second Trump term, and the S&P Clean Energy Transition Index XX:STRGLCEX jumped some 45% in 2025," Malek added. "Washington didn't rescue renewables. It turns out that data centers did."

If there's a takeaway here, it is that underlying economic and business trends tend to have a far greater bearing on markets than politics.

"Politicians set policy, but oil prices, interest rates, earnings and technology decide where the money goes," according to Malek. "That's why I take today's midterms with a grain of salt."

-Philip van Doorn

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