- S&P 500 has risen in the year after every US midterm election since 1950, averaging 15% gains
- The Federal Reserve has only started hiking rates with one 0.25% increase so far in this cycle
- Inflation is currently rising, reaching 3.7% in September, contrasting with past easing periods
The S&P 500 has risen in the year after every US midterm since 1950. But the Fed is only one hike into a new tightening cycle, inflation is climbing and a few stocks dominate the index. History offers less comfort than the streak suggests.
Since 1950, the S&P 500 has been higher a year after every US midterm election: 19 times out of 19. With Americans voting on November 3, that record is everywhere, from adviser newsletters to a widely shared post on X that billed it as part of "the CRAZIEST Market Statistic of all time".
The record is real. An analysis of daily S&P 500 closing prices confirms the streak, with an average gain of about 15% in the 12 months after election day.
But several conditions that surrounded past post-midterm rallies look different this time. The Federal Reserve has only just begun raising interest rates, inflation is accelerating, and seven stocks make up about a third of the index. None of that means the streak must end. It does mean the history is a weaker guide than a perfect record implies.
What The Record Actually Shows
Measured from the close on each midterm election day, the S&P 500 rose by an average of 15.1% over the next 12 months. J.P. Morgan Asset Management puts the post-midterm average at about 15%, Yahoo Finance reported this week. The figures exclude dividends.
The gains were not always large. The best year followed the 1954 election, at 33.2%. The weakest followed 1986, at just 1.1%, measured two weeks after the October 1987 crash.
A related claim, that the November-to-June stretch after every midterm since 1942 has been positive, is shakier. It holds for all 19 elections since 1950. But in 1946, the index closed at 15.33 on the eve of the election and at 15.21 on June 30, 1947: a 0.8% decline. The streak survives only if the count starts after election day.
Notably, two features of the record matter for 2026. First, the Fed was raising rates in the 1994, 2018 and 2022 midterm years. The S&P 500 still gained 27.1%, 11.7% and 14.5% respectively in the following 12 months.
Secondly, in seven midterms, the index was within 4% of its all-time high on election day. Those years averaged a 16.2% gain afterwards, against 14.9% for the nine that started more than 10% below a record.
What's Different In 2026-27
The Fed is at the start of its hiking, not the middle.
The Fed raised its benchmark rate by a quarter point to 3.75%-4.00% on September 16, its first hike since July 2023, in a unanimous 12-0 vote. In the three earlier midterm years with Fed hikes, far more tightening was already done by election day: 1.75 percentage points in 1994, 2.00 in 2018 and 3.75 in 2022, according to Federal Reserve records. This time it is 0.25.
Policymakers' median projection puts the rate at 4.1% by the end of 2026, implying one more hike. Fed funds futures pointed to a peak near 4.8% in a little over a year, Reuters reported last month, citing LSEG data. Traders saw a 90.6% chance of no change at the October 27-28 meeting, according to the CME FedWatch tool as of October 22.
That matters because the first months of a hiking cycle are usually the bumpiest. The S&P 500 has fallen a median 2.6% in the three months after a first hike, according to LPL Financial data on six cycles since 1994, cited by Reuters. RBC Capital Markets found declines of 8% to 14% from peak in five of those cycles.
Inflation is rising, not falling
Consumer prices rose 3.7% in the year to September, up from 3.4% in August, according to the Bureau of Labor Statistics. Energy prices were up 20.4%. In 2022, inflation was far higher, at 8.2% in September, but it had already peaked at 9.1% in June. In 1994 and 2018, September inflation was 3.0% and 2.3%, based on BLS data published by the St. Louis Fed.
The 10-year Treasury yield touched 5.36% on October 7, near its highest level since 2002, the Associated Press reported. Brent crude settled at $100.20 a barrel the same day.
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A few stocks carry the index
The "Magnificent Seven" made up about 34.8% of the S&P 500's market value as of October 13, according to index-weight data cited by Benzinga. During the 2022 bear market, the group's weight was about 25%, according to Bloomberg data. More than 40% of index members have fallen this year.
What To Watch
The streak may well survive. The index closed at 7,623.68 on October 23, up 11.4% this year and 2.5% below its record. Its deepest fall this year was 9.1%, milder than the 17% average for midterm years since 1950.
But in the three earlier midterm years with Fed hikes, at least 1.75 percentage points of tightening was already done by election day. In two of them, 2018 and 2022, inflation was easing. In 2026, neither is true yet. The next tests come quickly: the Fed's decision on October 28, the vote on November 3, and October inflation data on November 10.
A 19-for-19 record tells investors what has happened. It cannot say whether the conditions that produced it still hold.
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