Cardi Bagger

The next 12 months could surprise a lot of investors. The U.S. midterm elections are in just 2 days, and history suggests the next 12 months could be very bullish for stocks. Since 1950, the S&P 500 has delivered positive returns in the 12 months following every single U.S. midterm election. That's 19 consecutive elections without a negative 12-month return. Another dataset going back to 1942 shows that stocks gained between November and June after all 21 midterm elections. According to Fidelity, the year following the midterms has also historically been the strongest year of the presidential cycle, with an average return of 18.7% between 1961 and 2024. Look at what happened after the last four elections: • 2010: The European debt crisis, U.S. credit downgrade and a nearly 19% market correction. The S&P 500 still delivered a slightly positive total return in 2011. • 2014: Oil prices collapsed, China slowed down and the Fed prepared to raise rates. The S&P 500 still managed a small positive total return in 2015. • 2018: The U.S.-China trade war and aggressive Fed tightening pushed stocks toward a bear market. The S&P 500 surged nearly 29% in 2019. • 2022: Inflation was above 8%, the Fed was aggressively raising rates and recession fears were widespread. The S&P 500 rallied more than 24% in 2023. But why have stocks historically performed so well after midterms? Midterm election years have historically been the weakest part of the presidential cycle, averaging just 3.8% returns compared with 10.9% during the other three years. Before elections, investors face uncertainty over which party will control Congress, taxes, government spending and regulations. Once the results are announced, some of that uncertainty disappears, allowing investors to make decisions with a clearer picture of government policy. Now the 2026 midterms are happening while AI stocks are selling off, inflation concerns are rising and geopolitical tensions remain elevated. Similar risks existed during previous election cycles, yet stocks still delivered positive returns in the periods highlighted above. If the historical trend continues, the S&P 500 could deliver another strong rally over the next 12 months.