Here’s a stock market streak that sounds too good to be true: Since World War II, the S&P 500 has been higher a year after every single midterm election.
That’s the finding of Bank of America analysts, as reported by investingLive in early October. Their numbers show the index was higher at both the six-month and one-year marks following each midterm since the war, averaging gains of roughly 13% and 14%.
With Election Day on Nov. 3, you’re going to hear that streak a lot. Some of the people repeating it will be trying to sell you something.
I was a stockbroker for 10 years and have been investing for more than 45 years. So let me tell you what this streak really means — and what I’d actually do with my money right now.
The streak is real, but it isn’t a law
This isn’t one bank’s quirky spreadsheet. Back in 2022, Reuters reported a Deutsche Bank count showing the S&P 500 rose in the year after all 19 midterms going back to 1946.
But go back further and the perfect record disappears. An analysis by The Motley Fool, using index data back to 1874, found the index was up a year later in 32 of 38 midterm cycles. That’s 84% of the time. It also means stocks fell six times.
Why would a midterm matter at all? Honestly, nobody knows for sure. Even Bank of America’s analysts say that over longer stretches, what drives stocks is company profits, valuations, hiring and business spending — not which party takes control.
And here’s something I’ll never forget. On Oct. 19, 1987, the Dow dropped 508 points, or 22.6%, in a single day. That crash hit less than a year after the Nov. 4, 1986, midterm.
A streak didn’t make that Monday any less terrifying. But anyone who sold in a panic locked in losses they didn’t have to take.
Within two trading days, the Dow had recovered more than half of what it lost. And within two years, stocks had topped their pre-crash peaks.
This year is different in one big way
Midterm years themselves have often been sluggish. Bank of America put the S&P 500’s average gain in a midterm year at around 3%.
Not this year. The bank said that as of late September, the index was up 13% for 2026, headed for its strongest midterm-year showing since 2006.
It’s cooled a bit since then. The S&P 500 closed Friday, Oct. 23, at 7,623.68 — up about 11.4% for the year.
Why does that matter? As I see it, part of the typical post-midterm rally is likely a rebound. When stocks sag through a midterm year, there’s room to rebound once the votes are counted. This year, there’s no sag to bounce back from.
Stocks aren’t on sale, either. As of Oct. 16, FactSet put the S&P 500’s forward price-to-earnings ratio at 19.0. That’s a bit under both its five-year average of 19.8 and its 10-year average of 19.1.
In plain English, investors are paying about $19 for every dollar companies are expected to earn over the next year. That’s a hair cheaper than usual. It’s not a bargain-basement price.
Quick thought — most financial “gurus” got rich selling advice, not following it. I’d rather show you what actually works, because I’ve lived it. Sign up for the free Money Talks Newsletter for money advice from someone who takes his own. 10 seconds, no spam.
Don’t sell because of the election
Whichever party wins on Nov. 3, I wouldn’t sell a single share because of the results. Bank of America’s analysts said the same thing. Bailing out over short-term political worries has rarely worked out for long-term investors.
I learned that in 1987. Selling in a panic turns a paper loss into a real one. Sitting tight lets you ride the recovery.
Trying to jump out before bad news and back in before good news sounds smart. In practice, it’s a common way for ordinary investors to lose money. Here’s a closer look at why, in “7 Brutal Truths From a 40-Year Veteran.”
Don’t bet big on a rally, either
The flip side is just as dangerous. If you’re tempted to pile extra money into stocks because “the market always goes up after midterms,” remember the six times since 1874 when stocks didn’t rise in the year after a midterm.
An average is just an average. It blends great years with bad ones. Say you put $50,000 in expecting the historical 14% average, and you’re picturing a $7,000 gain. But you could end up with a loss instead.
That’s money you might have needed for a roof, a car or your next year of retirement income. Never invest money based on a pattern you can’t explain.
What I’d do now: stick to a plan
Here’s what I’d tell a friend over coffee.
- Check your mix. After a strong year, your mix has probably drifted toward stocks. Say you started with $100,000, split 60% stocks and 40% bonds. If stocks gained 11% and bonds went nowhere, stocks are now about 62.5% of your money.
- Sell a little of the winner. Rebalancing just means trimming what grew and topping up what didn’t, until you’re back to the split you chose. It forces you to sell high, which is surprisingly hard to make yourself do.
- Add new money on a schedule. Put the same amount in every month, rain or shine. That’s called dollar-cost averaging. You’ll buy more shares when prices dip and fewer when they’re high, and you’ll never have to guess.
- Keep money you’ll need soon out of stocks. Cash you’ll need in the next one to three years, for a house, tuition or retirement bills, doesn’t belong in the stock market. Stocks can lose more than a fifth of their value in a day. I’ve lived it.
If your 401(k) has been riding the rally untouched, it’s worth reading why it may be time to rebalance before it’s too late. And if you’re not sure how much stock is right for you, see what Americans your age typically keep in stocks.
Don’t have a plan at all, or not sure yours still fits? That’s a good reason to sit down with a pro. You can find a financial advisor here.
The bottom line
History says stocks have a good shot at rising over the next year. I hope they do. But history isn’t a plan, and a streak isn’t a promise.
The election will come and go. Your goals won’t. Build your investments around what you need and when you’ll need it, not around who wins in November.
That’s the lesson 1987 taught me, and I’ve never forgotten it.
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