Midterm Elections Could Set Up a 21% Stock Market Rally in 2027 — Here’s What 76 Years of History Show
Every midterm election since 1950 has set off the same chain reaction in the stock market, and with November approaching, Wall Street is quietly watching one of history's most stubborn patterns prepare to repeat itself or finally break.
Wall Street has plenty to worry about heading into 2027. Inflation remains stubborn, Treasury yields are hovering around 5%, and investors are questioning whether the artificial intelligence boom can sustain the stock market’s multiyear rally. With the November midterm elections approaching, political uncertainty adds another complication.
Yet one of the stock market’s most reliable historical patterns suggests investors could be looking at another strong year.
Going back to 1950, the S&P 500 has gained an average of nearly 21% in the calendar year following midterm elections. More remarkably, it hasn’t recorded a single losing year over that stretch.
A 76-Year Winning Streak Wall Street Can’t Ignore
Midterm elections have historically marked a turning point for stocks. The second year of a presidential term tends to be the weakest of the four-year election cycle, while the third year has produced some of the strongest returns.
An examination of S&P 500 total returns, including reinvested dividends, shows the index gained an average of 20.9% in the 19 calendar years following midterm elections between 1950 and 2022.
The winning record is even more remarkable than the average.
| Post-Midterm Year | S&P 500 Total Return |
| 2003 | +28.7% |
| 2007 | +5.5% |
| 2011 | +2.1% |
| 2015 | +1.4% |
| 2019 | +31.5% |
| 2023 | +26.3% |
| 1951–2023 average | +20.9% |
| Positive years | 19 of 19 |
Sources: Morningstar, PNC Financial Services, and historical S&P 500 total-return data. Returns cover January through December following each midterm election, not the 12 months immediately after Election Day.
The pattern suggests the stock market’s historical midterm-year weakness has often given way to a powerful recovery once the election uncertainty passes.
It Doesn’t Matter Which Party Controls the White House
Investors often obsess over whether Republicans or Democrats will control Congress. Historically, however, the party occupying the White House hasn’t prevented post-midterm rallies.
The median calendar-year S&P 500 returns following midterms since 1950 tell the story:
- Republican presidents: 25.6%
- Democratic presidents: 22.8%
Both figures represent returns far above the stock market’s long-term average annual gain of roughly 10%, including dividends.
Surprisingly, the record includes periods of divided government, recession concerns, and major disagreements over economic policy.
J.P. Morgan Asset Management offers one explanation:. Elections create uncertainty over taxes, regulations, and government spending. Once voters make their decisions, businesses and investors have greater clarity about what policies might emerge.
That doesn’t mean elections cause stocks to rise. Corporate profits, economic growth, and Federal Reserve policy still determine whether investors have reasons to pay higher prices. Indeed, the current bull market has already delivered returns that stand out against nearly a century of history.
Could 2027 Finally Break the Pattern?
There are reasons the next post-midterm year might disappoint. The Shiller cyclically adjusted price-to-earnings (CAPE) ratio, which measures stock valuations against 10 years of inflation-adjusted earnings, recently exceeded 40. Historically, valuations this elevated have been associated with weaker long-term returns.
Meanwhile, the 10-year Treasury yield above 5% offers investors an alternative to stocks while raising borrowing costs for households and businesses. Billionaire hedge fund manager Paul Tudor Jones has even warned that 2027 could become the worst year for stock market money flows since 2002.
Granted, historical patterns aren’t guarantees. The 19 post-midterm years are a relatively small sample, and a 21% average doesn’t mean the S&P 500 will necessarily deliver anything close to that return next year. Still, investors shouldn’t dismiss a pattern that has survived inflation shocks, recessions, and changing political administrations.
Key Takeaway
In short, 76 years of history make a compelling bullish case for 2027. The S&P 500 has risen in every calendar year following a midterm election since 1950, averaging nearly 21%, regardless of which political party occupied the White House.
For investors, the sensible strategy isn’t betting everything on an election outcome. It’s maintaining a diversified portfolio, reinvesting dividends, and using market pullbacks to build positions in quality companies.
History favors the bulls in 2027. Whether they deliver another victory will ultimately depend on earnings, valuations, and interest rates — not which party wins in November.
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After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years, he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, Money Morning, and, of course, 24/7 Wall St. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
