S&P 500 Historically Rallies After Midterms, Data Back to 1957 Show

The S&P 500 has performed far better in the six months after midterm elections than in comparable periods of any other year in the presidential cycle, according to market data compiled by Mark Hulbert going back to the index's creation in 1957.

Americans head to the polls on Tuesday for the 2026 midterms. RealClearPolling's early Election Day data projected Democrats winning 227 of the 435 U.S. House seats, Republicans winning 180, with 28 toss-ups — enough for a Democratic majority even if Republicans swept every toss-up.

The Senate picture was less clear. Of the 35 Senate seats up for grabs out of 100, Democrats were favored in 47, Republicans were seen as a lock for 44, and nine seats were toss-ups. Even if Republicans held their Senate majority, a Democratic House takeover would deliver two years of divided government — and, likely, a round of House committee investigations of Trump administration officials.

Why party labels mislead investors

Investors who let political preferences drive trades routinely miss profit opportunities, professional investors told MarketWatch. Industry-party associations rarely predict share performance.

Joe Tigay, who co-manages the Rational Equity Armor Fund, warned against assuming "a political winner automatically produces a stock-market winner." He wrote: "But a company still needs customers, affordable financing and the ability to deliver."

The pattern shows up repeatedly in sector bets. Mark Malek, CIO of Siebert Financial, pointed to oil-and-gas stocks, which were "supposed to struggle" under President Biden after he canceled the Keystone XL pipeline on his first day in January 2021. Instead, energy was the best sector in the S&P 500 in both 2021 and 2022 — and in 2022 the only sector to finish the year higher.

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

What did 2016 teach about election night?

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

The next day the S&P 500 rose 1.1% and the Dow Jones Industrial Average 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."

Where should investors look instead?

Tigay said fundamentals reclaim attention quickly. "Once the election is behind us, I expect attention to return quickly to earnings, interest rates and oil," he wrote. "A clear result would help, but it won't resolve those questions."

He flagged state and local races as the most consequential for energy investors. "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," Tigay wrote. Whether projects get approved, and what data centers ultimately pay for electricity, "can matter much more to a company's earnings than the national election headline," he added.

Spenser Lerner, a portfolio manager at Harbor Capital, wrote in the firm's "Midterm Mosaic" report that AI-focused investors 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 questions, Lerner wrote, "remain relevant after election day, regardless of which party gains seats" in Congress.

Underlying economic and business trends carry more weight in markets than politics, the managers argued. As Malek put it: "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."