Trevor Jennewine, The Motley Fool
4 min read
The U.S. stock market is having another fantastic year. The S&P 500 (SNPINDEX: ^GSPC) is up 11% in 2026. If the benchmark index simply stays at its current level, it will mark the fourth straight year of double-digit gains, something that last happened during the dot-com bubble in the late 1990s.
However, the S&P 500 tends to drop sharply around midterm elections, and the stakes are particularly high this year because the Democrats could win control of the House, leaving Congress split. That would make it very difficult for the Trump administration to pass major legislation, which means midterms are a major source of policy uncertainty.
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Here’s what investors should know.
History says the stock market could drop sharply around the midterm elections
Since its creation in 1957, the S&P 500 has consistently performed poorly during midterm election years. The index has suffered an average intra-year drawdown of 18%, and those declines almost always came in the third or fourth quarters. In other words, history says the S&P 500 will close 18% below its high at some point in the remaining months of 2026.
Also noteworthy, 17 midterm elections have occurred since the S&P 500 was created in 1957. In those years, the index fell into market correction territory 12 times and it dropped into bear market territory six times. That puts the odds of a correction and bear market at about 70% and 35%, respectively, in the months ahead.
What explains that pattern? Midterm elections create uncertainty. The political party that controls the White House almost always loses seats in Congress, leaving investors to wonder about the future direction of fiscal, trade, and regulatory policies. The stock market responds poorly to uncertainty.
But there is some good news. That uncertainty tends to dissipate quickly. Carson Research says the six-month period following midterm elections (November to April) has historically been the strongest period of the four-year presidential cycle. The S&P 500 has returned an average of 14% during those six months.
Should investors sell their stocks to avoid volatility around the elections? Absolutely not. Past performance is never a guarantee of future results. The S&P 500 may keep climbing in the remaining months of the year. And even if the stock market crashes, attempting to time the bottom is dangerous.
