Election years can make investors uneasy. Headlines grow louder, political rhetoric intensifies, and market volatility often follows. For many investors, midterm elections can feel like turning points that may reshape the economy, alter tax policy, or change investment outcomes.
Yet history tells a calmer story.
While political uncertainty can affect market sentiment in the short term, long-term investment performance has historically depended more on economic fundamentals, corporate earnings, innovation, and disciplined investing than on which political party controls Washington. For investors, the key lesson is not to react emotionally to election cycles, but to stay focused on long-term financial goals.
A Capital Group analysis of more than 90 years of market history highlights several important trends investors should understand about midterm election years.
Midterm Elections Often Create Anxiety, but Markets Adapt
Midterm elections occur halfway through a presidential term and are often viewed as a referendum on the sitting administration. Historically, the president’s party tends to lose seats in Congress, which can shift the balance of legislative power.
Historical data shows that the president’s party has lost an average of 27 House seats and three Senate seats during midterm elections over the past several decades. Investors often view these elections as periods of uncertainty because changes in congressional control can affect policy priorities, spending, taxes, and regulation.
Still, financial markets are forward-looking. Much of the anticipated political change is often reflected in market prices before Election Day. By the time ballots are cast, investors and institutions have usually adjusted their expectations.
That helps explain why election-related market fears often prove temporary rather than lasting.
Markets Tend to Slow During Midterm Years
Stock market returns during midterm election years have typically been more subdued than average.
Since 1931, the S&P 500 has generated average returns of about 4.7% during midterm years, compared with roughly 9.5% during non-midterm years.
The reason is straightforward: markets dislike uncertainty. Early in an election year, investors often face unanswered questions about legislation, fiscal policy, taxes, and regulatory priorities. As uncertainty rises, investors may become more cautious, which can slow market momentum.
Even so, this pattern should be kept in perspective. Markets have historically remained positive overall during many midterm years, although market declines can still occur. Investors who leave the market during uncertain periods risk missing later rebounds.
That is an important reminder: trying to time the market around political events is difficult and often counterproductive.
Election Years Often Bring Higher Volatility
For investors watching daily market swings, election cycles can feel stressful. Historical data supports that view.
Midterm election years have generally experienced higher market volatility than other years. Political campaigns can heighten concerns about inflation, taxes, health care, trade, government spending, and corporate regulation. These narratives can trigger emotional reactions and short-term market turbulence.
Volatility has often risen most sharply in the months leading up to Election Day. But short-term volatility is a normal part of investing. It should not automatically be viewed as a sign of long-term market weakness.
In some cases, volatility can create opportunities for disciplined long-term investors who remain diversified and focused on their financial plans.
Markets Have Historically Rebounded After Midterms
One of the more encouraging historical patterns is what has happened after midterm elections.
Historically, markets have often recovered once political uncertainty begins to fade, although past trends do not guarantee future results Since 1950, the average one-year market return following midterm elections has been about 15.4%, nearly double the average return during other periods.
This reinforces an important principle: uncertainty often weighs more heavily on markets than the election outcome itself.
Once investors gain more clarity about the political and economic landscape, confidence tends to improve. Businesses continue operating, consumers continue spending, and markets refocus on earnings growth, interest rates, and broader economic conditions.
Of course, every election cycle is different. Inflation trends, Federal Reserve policy, geopolitical tensions, global growth, and corporate profits all continue to play major roles in market performance. Elections are only one factor among many that influence investor sentiment.
Political Control Has Had Limited Long-Term Impact
One of the more notable findings from long-term market history is that investment returns have remained relatively strong under different political arrangements.
Since 1933, markets have delivered double-digit average annual returns across unified governments, divided governments, and split congressional control.
That highlights a point many investors overlook: markets are often more resilient than political headlines suggest.
Companies continue to innovate. Businesses adapt. Economies evolve. While policy changes can affect specific industries or sectors, long-term wealth creation has historically been driven by productivity, earnings growth, technological advancement, and consumer demand.
What Investors Should Focus On Instead
Election cycles often create uncertainty, emotional headlines, and strong opinions—but history has consistently shown that long-term market success is rarely determined by a single political outcome. While elections may influence short-term volatility, investors are often better served by focusing on enduring financial principles rather than reacting emotionally to daily news cycles.
At West Advisory Group, we’ve guided clients through multiple election cycles, recessions, bull markets, bear markets, and periods of heightened uncertainty. Over the years, we’ve learned that while we can’t control political outcomes or market reactions, we can control preparation, discipline, and process. That’s exactly why we developed our PEAK FORMula—our signature approach designed to help clients navigate every ebb and flow of retirement life with structure and confidence.
A Long-Term Strategy for Long-Term Retirement Goals
For investors approaching retirement—especially those within five years of transitioning from the accumulation phase into the distribution phase—having a disciplined strategy becomes even more important. Emotional reactions to headlines can lead to costly decisions at precisely the wrong time.
Through our PEAK FORMula, our team of experts helps clients stay focused on what truly matters: maintaining a diversified portfolio aligned with long-term goals, reviewing financial plans regularly, and making thoughtful adjustments based on changing life circumstances—not political noise.
We believe successful retirement planning is less about predicting elections and more about building a resilient strategy that can adapt regardless of who is in office. That means focusing on time in the market rather than trying to time the market, maintaining proper diversification, and ensuring risk levels match each client’s personal goals and comfort level.
Political uncertainty may dominate headlines for months at a time, but markets—and retirement journeys—continue long after election seasons end. At West Advisory Group, one of the most valuable roles we play is helping clients separate short-term emotion from long-term strategy so they can move into retirement with clarity, confidence, and peace of mind.
