Weekly market brief
Midterms and markets: what 80 years of data say
Democrats won Congress. Here is what history says markets do next, what is different this time, and how to stay on plan.
Coach Toni · · 2 min read
This week in 60 seconds
- The result: Democrats won the House and Senate. From January, Washington is divided.
- The reaction: a big rally, then a sharp drop the next day.
- History: stocks rose in the 12 months after every midterm since 1946.
- The catch: rising rates, sticky inflation and AI-heavy markets make this year different.
- Our approach: stick to the plan. Don't trade the headlines.
The week in numbers
| What | Where it stands |
|---|---|
| S&P 500 | About 7,600 (Nov 11) |
| Nasdaq | Fell into correction on Nov 5, now recovering |
| Fed interest rate | 3.75% to 4.00%, after a hike in September |
| Chance of another hike in December | About 77% to 79% |
| US 10-year bond yield | Near 5% |
| US inflation | 3.7% in September, October hotter than expected |
| NVDA this month | Down about 14% |
What happened
Democrats won control of both the House and the Senate on November 3.
From January, a Republican president will work with a Democratic Congress. This is called divided government.
Markets reacted fast, in both directions.
| Day | What markets did |
|---|---|
| Nov 4 | The Dow jumped about 3%, its best day after a midterm in 44 years. Bond yields fell. |
| Nov 5 | The rally reversed. Chip stocks led the fall. |
| Since then | A partial recovery, led by AI stocks. |
Source: J.P. Morgan Wealth Management
Up 3% one day, down 4% the next. Anyone trading the headlines was likely wrong twice.
What 80 years of history say
1. The year after a midterm is usually strong
| Since 1946 | Result |
|---|---|
| Midterms studied | 20 |
| S&P 500 higher 12 months later | 20 out of 20 |
| Average gain in those 12 months | About 15% |
| US recessions in a president's third year since 1950 | None |
Sources: Carson Group; Truist.
2. But this outcome has the weakest record
This chart shows the average yearly S&P 500 return under each mix of party control.
Source: Dave Manuel, using NYU Stern (Damodaran) return data
Our situation is the last bar. It looks weak, but read it carefully.
Those 22 years include the 1973–74 oil shock and the 2008 financial crisis. Remove those few years and the average rises to about 14%, in line with the rest.
The economy and the Fed matter far more than which party controls Congress.
3. Gridlock usually means fewer surprises
A divided Congress tends to pass fewer new laws.
| Usually good for markets | Can cause short-term swings |
|---|---|
| Fewer sudden tax changes | Fights over the budget |
| Fewer sudden rule changes | Political deadlines and headlines |
Why this year could be different
History is a guide, not a promise. Here is how 2026 compares.
| What usually happens | 2026 | |
|---|---|---|
| Stocks before the vote | Up 2.9% in the year before | Up 12.1%: less room to bounce |
| Interest rates | Often steady or falling | Rising, another hike likely |
| Midterm-year pullback | 18% to 19% on average | About 9%: the big dip may not be over |
| What drives the market | Broad mix of sectors | A few AI and Big Tech names |
Source: U.S. Bank
What to watch next
| When | What | Why it matters |
|---|---|---|
| Dec 8–9 | Fed meeting | A rate hike would pressure stocks |
| Mid-December | November inflation report | Decides how far the Fed goes |
| Coming weeks | Big Tech and AI results | The market's main engine |
| January | New Congress sits | Budget fights can bring volatility |
For investors in francs: a weaker dollar lowers your return on US stocks, even when they rise. Keep that in mind when you compare results.
The attitude to have
Stick to your plan.
Don't follow what others are saying: the news, social media, or friends.
Markets will swing, especially with rising rates and a market leaning on AI. That's normal.
History favours patient investors after midterms. Averages are not promises, but patience is the strategy.
Sources: AP via NPR; CNN; J.P. Morgan Wealth Management; U.S. Bank; Carson Group; Truist; Bloomberg; Reuters; Dave Manuel / NYU Stern. Data as of November 11, 2026. Educational content, not personal advice.
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