The midterms are over. The Democrats had a sweeping victory.
What did the stock market think?
The futures market started dipping late into election night on the news, and then surged by the time trading started the next day.
On Thursday the market traded sharply downward. The AI trade especially got a bloody nose.
So, are stocks happy or sad with the results? What changed in a single day?
I’ve written many times about the importance of not letting your ballot or the nation’s ballots influence your investment decisions. I’ve seen too many people make errors doing that.
Did you know that since 1950 the S&P 500 has been up 100% of the time over the next year after every midterm?
Gridlock between a Republican White House and a Democratic Congress is not always a bad thing for the market. In fact, Ryan Detrick, Chief Market Strategist for Carson Group, points out that markets have averaged 15.5% a year out, the seven times since Eisenhower that a Republican President has had a Democrat-led Congress.1
All this data may be well and good. Only the future will prove whether or not it rings true. The important thing to remember, as JPMorgan’s Michael Cembalest notes, is that it is not usually the results of the midterms that shape what the market does. He writes,
The business cycle drives markets, and the important components are things that midterms do not affect: 10 yr interest rates, commodity prices, Fed policy, corporate profits, budget deficits, defense spending, the pace of AI investment over the next 12 months, the ferocious borrowing needs of AI companies and the impact on credit spreads, etc.2
Keep an eye on things like earnings and interest rates more than enticing clickbait meant to massage or enrage your political pressure points.
What if recent volatility from last week continues? That should surprise no one. While humongous drawdowns of 20% or more are rare (though possible!), 5% drawdowns have occurred 73 times and 10% drawdowns have occurred 26 times since 1950.
Think of how many political shifts we’ve had since Ulysses S. Grant was President in 1874. How have US stocks done since then? According to Measure of a Plan, they’ve averaged about 8.6% annually.3
We now know how the political landscape looks. At least for another two years.
Before we know it, we will be talking about the election of 2028.
Just be cautious about changing your investment behavior as often as America switches its preferred political party or as quickly as the stock market changed its mind last week.
Know someone who needs help managing their investment behavior in the midst of political change? Send them our way.
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Sources:
1. Published on X on November 4, 2026. Accessed online.
2. “Now You Can See Everything: on the midterms, AI, markets, the Theranos film and corporate fraud” from “Eye on the Market” published on November 4, 2026. Accessed online.
3. “U.S. Stock Market Returns – a history from the 1870s to 2024”, published on January 2, 2025. Accessed online.