U.S. stocks have historically performed well in the months following midterm elections, but experts say 2026 may not follow that pattern. Over the past 70 years, stocks have mostly gained between midterm elections and year-end, and since 1980 the S&P 500 has risen an average of 13.7% in the year after midterms, according to a CNBC analysis. The Pew Research Center, however, describes it as uniquely difficult to predict how this year's midterms will affect the market.
Investors heading into the November vote face a considerable amount of uncertainty, which markets generally dislike. Analysts point to several open questions: whether the war in Iran will keep pushing already elevated oil prices higher, how inflation will develop with or without an interest rate hike from the Federal Reserve, and how the technology sector will fare amid growing concerns about heavy spending on artificial intelligence.
The political stakes are also high. The elections could reshape the political map, with 435 seats in the U.S. House of Representatives and 35 in the U.S. Senate in play. Voters will also decide 36 state governorships, thousands of state legislative seats and 145 state ballot measures, according to the Taubman Center for American Politics and Policy at Brown University's Watson Institute.
Eric Patashnik, a political science professor and director of the Taubman Center, described the 2026 contest as among the most consequential in decades. Many races remain too close to call, leaving open whether Democrats will regain control of the House and possibly the Senate, and how markets would react to that outcome.
Market reaction could cut both ways. A rally is possible, but so are declines in sectors connected to government, including defense, healthcare, cryptocurrency and artificial intelligence. A Democratic sweep in one or both branches of Congress could give the party the power to investigate U.S. companies, a prospect that could weigh on those industries. Even for experts, the outcome is impossible to predict.
Other economic pressures are shaping the backdrop. Analysis from Fortune reports that consumer prices rose 3.7% in the year through September, and gasoline rose about 34%. The World Bank has described the oil shock since the Iran war closed the Strait of Hormuz in March as the largest oil market shock in history. Real GDP grew at a 3.4% annual rate in the third quarter, up from 2.2% in the second, according to the Bureau of Economic Analysis, with spending on computer equipment a main driver.
Labor market signals are mixed as well. Challenger, Gray & Christmas counted 573,195 announced U.S. job cuts through September, with artificial intelligence cited in 120,136 of them, more than any other reason this year. Stanford economists found that employment among 22- to 25-year-olds in the most AI-exposed occupations was about 19% below its expected level as of June, a gap that had been 15% a year earlier.