S&P 500 Has Gained 15.5% on Average After Midterms Since 1950

The S&P 500 has delivered an average return of 15.5% in the nine months between Election Day and June 30 of the following year, according to an analysis by Matt Cerminaro, founder of Exhibit A, a content platform for financial advisers. That record stretches back to 1950 and, crucially, has held no matter which party won.

The pattern matters now because investors are rattled. The S&P 500 sits only a few percentage points below record territory, yet a sharp pullback in semiconductors and other hot artificial-intelligence stocks has shaken sentiment.

The obstacles ahead are real. Treasury yields remain near their highest levels in decades, even after this week's rally pulled the 10-year yield back below 5%. The war in Iran is dragging on, and crude-oil prices have climbed back to levels last seen in May.

There is a fresh corporate worry too. Meta Platforms' latest earnings report offered investors little reassurance that the immense sums being spent on AI infrastructure will pay off. And with Anthropic expected to IPO soon, some investors fear a flood of new equity issuance from another mega-offering could overwhelm demand for stocks.

Still, earnings have held the line, one strategist argues.

"We've had high oil prices be a catalyst for bear markets in the past; we've had higher interest rates do the same thing. There have been an awful lot of headwinds, but I think earnings have offset these headwind concerns," said Sam Stovall, chief investment strategist at CFRA Research.

He has a point. The biggest U.S. companies have recently been growing earnings at a breakneck pace, and Wall Street expects results to keep dazzling investors through 2027. The caveat is standard but worth repeating: past returns are no guarantee of future performance.

What does the midterm pattern actually say?

Cerminaro's advice is blunt. "The best midterm strategy is to turn off the TV and set a buy order for Election Day," he told MarketWatch.

Next year brings the third year of the four-year presidential term cycle — historically the market's strongest period, according to Stovall. The fourth quarter of a midterm year has posted the second-strongest average performance of the 16 quarters in the cycle. The single best quarter is the first quarter of year three, which begins in January.

CFRA's numbers by year of the presidential cycle:

• Year 1: Q1 flat (0.00%), full year +9.5%
• Year 2: full year +3.8%, but Q4 averages +6.4% — the cycle's second-best quarter
• Year 3: full year +16.3%, with Q1 averaging +7.0% — the best quarter of all 16
• Year 4: full year +6.8%
• All years: Q4 is the strongest calendar quarter at +4.2%, versus a 9.1% full-year average

In plain words: the strongest stretch of the entire four-year cycle starts roughly now and runs through next spring.

Why does the pattern exist?

Stovall argues this is not a statistical quirk. "The reason for this is the party in power wants to stay in power after the upcoming presidential elections," he said. "They start passive stimulative measures that will likely bear fruit by the time the person or the party is up for re-election."

President Trump has already gotten a head start. With Republican support in Congress, he delivered landmark tax cuts in 2025. While campaigning for the midterms, Trump said he would pay every American adult a $5,000 "dividend" if Republicans held both the U.S. Senate and the House — a promise that still requires full GOP control to materialize.

The fourth quarter's strength extends beyond election years, Stovall's data shows. It is the strongest calendar quarter on average across the entire cycle.

Can the rally happen without tech?

Here lies the catch. Much of the recent market pain has centered on technology stocks, and tech carries a weighting of just under 40% in the S&P 500. For the index to match its historical post-midterm performance, that sector almost certainly has to participate.

"I haven't worked out the exact mathematics, but it is highly improbable for the S&P 500 to put in a sizable gain without the participation of the largest tech companies," said Steve Sosnick, chief strategist at Interactive Brokers.

The historical record, in short, is encouraging but conditional: a 15.5% average post-election gain depends on the very stocks that just took the hardest hit leading the way back.