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The ballots have been cast. Some voters are celebrating, others are disappointed, and a few races may still be awaiting a final count. For investors, the question is familiar: What does this mean for my portfolio?
History offers some useful perspective. Midterm years have often been bumpy for stocks, while the months after the vote have tended to be much stronger. That tendency has held regardless of which party came out ahead.
A Weak Year, Then a Strong One
Stock returns have historically followed a rhythm across the four-year presidential cycle. The midterm year, which falls in the second year of a president’s term, has generally been the weakest. The year that follows has generally been the strongest.
Since 1932, the S&P 500 has averaged a price return of 3.3% in midterm years, compared with 14.0% in the third year of a presidential term. Much of the midterm-year weakness has come in the months leading up to the vote.
S&P 500 Performance During the Four-Year Presidential Cycle Since 1932
Source: RBC Wealth Management/Bloomberg, 1932–2025. Returns exclude dividends.
These are averages, not a schedule the market is obligated to follow. This year is a good reminder: in what has historically been the cycle’s weakest year, the S&P 500 was up roughly 11% through October.
What Happens After the Election?
BlackRock’s analysis of midterm elections since 1970 found that the S&P 500 returned an average of 14.1%, including dividends, in the six months following the vote. That compares with 5.7% over the same stretch in non-midterm years. On average, the advance began about a month before Election Day.
S&P 500 Total Return, since 1970, Indexed to Midterm Date
Source: Blackrock. Average S&P 500 performance approximately six months before and after midterm elections.
One possible explanation is clarity. Before an election, businesses and investors must weigh a range of outcomes for taxes, spending, and regulation. Once the picture comes into focus, they can plan around the policy environment they actually have, whether or not they like it.
Washington Is Only Part of the Picture
Politicians influence the economy, though their influence on stock returns is often overstated. Over time, corporate earnings, interest rates, and the broader economy have done more to drive markets than control of Congress. Several difficult midterm years coincided with economic headwinds. In 2022, for example, the S&P 500 fell about 19% as the Federal Reserve raised rates aggressively to fight inflation. The election was only one part of that story.
It is also worth remembering that there have been fewer than two dozen midterm elections in the modern market era. That is a small sample, and patterns built on small samples deserve some humility.
We are not in the business of forecasting, and an encouraging historical pattern does not change that. It cannot promise a rally over the next six months or tell us when the next decline will arrive.
What history can do is provide perspective. Investors have navigated many changes in political leadership, and businesses have continued finding ways to adapt and grow. Whether yesterday’s results brought relief or frustration, our approach remains the same: stay invested, stay diversified, and keep portfolio decisions aligned with your long-term plan.
Week in Review
- Federal Reserve: The Fed held its target interest rate steady at 3.75%–4.00% at its October meeting, following September’s increase. Officials noted that economic activity remains strong and inflation remains elevated. Two officials favored another 0.25% increase.
- Economic Growth: The U.S. economy grew at a 3.4% annualized rate in the third quarter, up from 2.2% in the second quarter, according to the initial GDP estimate. Growth reflected increases in investment, consumer spending, and government spending, while trade weighed on the results.
- Corporate Earnings: With 60% of S&P 500 companies reporting third-quarter results, 82% have exceeded earnings estimates. FactSet’s October 30 report puts earnings growth at 30.2%, combining reported results with estimates for companies yet to report. If maintained, that would mark the third straight quarter of growth above 25%.
Hot Reads
Markets
- Fed Holds Rates Steady but Two Officials Sought Another Increase (WSJ)
- The Fed's AI Puzzle: Will High Rates Slow the Boom? (WSJ)
- Fed Officials Are Already Saying They'll Need to Get Back to Hiking Rates (CNBC)
Investing
- Don't Let Politics Poison Your Portfolio (Jason Zweig)
- Earnings & Expectations (Ben Carlson)
- Private Funds (Humble Dollar)
Other
- Do Elections Matter to the Stock Market? - The Informed Investor (YouTube)
- The Race to Power AI is Reshaping America's Electric Grid - CNBC (YouTube)
- How India's Day Retail Traders Lost Billions (YouTube)
Markets at a Glance
Fund Returns
Sector Returns
Factor Returns
Source: Morningstar Direct.
Source: Morningstar Direct.
Source: Treasury.gov
Source: Treasury.gov
Source: FRED Database & ICE Benchmark Administration Limited (IBA)
Source: FRED Database & ICE Benchmark Administration Limited (IBA)
Economic Calendar
Source: MarketWatch
- Competition, Achiever, Relator, Analytical, Ideation
Josh Jenkins, CFA
Chief Investment Officer, Principal
Josh Jenkins, Chief Investment Officer, began his career in 2010. With a background in investment analysis and portfolio management from his previous roles, he quickly advanced to his current leadership position. As a member of the Lutz Financial Board and Chair of the Investment Committee, he guides Lutz Financial’s investment strategy and helps to manage day-to-day operations.
Leading the investment team, Josh directs research initiatives, while overseeing asset allocation, fund selection, portfolio management, and trading. He authors the weekly Financial Market Update, providing clients with timely insights on market conditions and economic trends. Josh values the analytical nature of his work and the opportunity to collaborate with talented colleagues while continuously expanding his knowledge of the financial markets.
At Lutz, Josh exemplifies the firm’s commitment to maintaining discipline and helping clients navigate market uncertainties with confidence. While staying true to the systematic investment process, he works to keep clients' long-term financial goals at the center of his decision-making.
Josh lives in Omaha, NE. Outside the office, he likes to stay active, travel, and play golf.
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