Midterm Elections Are Over. Here’s What History Says About the Next 12 Months
History gives retirement savers a surprisingly consistent playbook for the 12 months following a midterm election, but that same record hides a recurring trap that has blindsided investors every single cycle.
Election nights tend to rattle retirement savers, but Wall Street opened Wednesday more calmly. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY), the most widely held stand-in for the benchmark S&P 500, traded at $763.08 before the open on November 4. That was up 1.16% from its November 3 close of $754.35. Reuters reported that stocks rallied and the dollar dipped after what it called a Democratic midterm sweep. But one session tells a 401(k) holder very little. The more useful guide is how the index behaved in the weeks and months after past midterms. That record shows a steady winning run, along with a few sharp breaks.
Six Midterms, Five November Gains
SPY’s monthly adjusted prices add dividends back in and go back to December 1999. That covers six full midterm cycles. The table compares SPY’s October close just before each vote with its November close just after. The index rose in five of the six Novembers and finished flat in the sixth.
| Midterm | October close | November close | November move |
|---|---|---|---|
| 2002 | 57.2113 | 60.7402 | 6.2% |
| 2006 | 95.5347 | 97.4344 | 2.0% |
| 2010 | 89.4014 | 89.4014 | 0.0% |
| 2014 | 165.1090 | 169.6449 | 2.7% |
| 2018 | 239.9295 | 244.3800 | 1.9% |
| 2022 | 366.6418 | 387.0240 | 5.6% |
The 2002 and 2022 cycles stand out. Both followed severe bear markets, and in each case SPY rallied after the vote. SPY rose more than 5% in November in both years. The worst case was 2010, when the index closed in November exactly where it closed in October.
A Year Later, Blue Chips Finished Higher Every Time
The longer view is even more consistent. The SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA:DIA) tracks the Dow Jones Industrial Average. It finished higher in all six cycles since 2002, measured from the October close before each vote to the November close a year later. The smallest gain was 4.8% after the 2014 vote and the largest was 20.0% after 2002. In between came 13.9% after 2006, 11.2% after 2010, 14.6% after 2018, and 12.4% after 2022. That run fits a pattern we have tracked before: the year after a midterm has historically been one of the better periods of the four-year presidential cycle.
Where the Pattern Broke
For anyone near retirement, there is a catch: even the good years came with painful setbacks. In 2018, SPY gained 1.9% in November, then fell 8.8% in December alone. It ended the year at an adjusted 222.8902, which was 7.1% below its level before the election. December also gave back most or all of November’s gains in 2002 and 2022.
Even the 12-month periods that ended higher had real turbulence along the way. From November 2018 through October 2019, SPY returned 12.2%, yet at one point it sat 8.8% below its prior peak. From November 2022 through October 2023, SPY returned 4.2% and included an 8.3% drop. From November 2014 through October 2015, SPY returned just 2.4% and fell 8.5% between July and September 2015. In each of those three years, the post-midterm lift came with at least one drop of more than 8%.
Why 2026 Could Test the Playbook
This cycle starts from a higher level than most. SPY began Wednesday up 11.9% for the year and 265.9% over 10 years. Still, it went into the vote down 0.86% for the week and 0.85% for the month. The technology-packed Nasdaq-100 has been choppier. The Invesco QQQ Trust (NASDAQ:QQQ) hit $762.86 in October but ended the month at $690.49, 9.5% below that peak. It closed at $685.28 on November 3.
Early sector responses point to rotation, with groups moving in different directions. The Wall Street Journal reported that defense stocks sold off after Democrats’ midterm gains. A change in congressional control can reshape spending priorities, and the sectors most tied to Washington tend to adjust first, before broad index funds feel much of the shift.
A December Test Retirees Can’t Ignore
Over the long run, Wall Street has tended to come out stronger after midterms. The Dow ETF’s six-for-six record a year out backs that up. The shorter-term lesson from 2018 is that a strong November can turn into a rough December. I’m watching whether SPY holds above its October close of $755.72 through year-end. Falling below the pre-election October close is exactly what happened in December 2018. For index fund and 401(k) holders, the record points to a positive year ahead, with at least one sharp drop likely along the way (a drawdown early in retirement does far more damage than one later on, which is the whole subject of our free guide on defending the first five years: The First Five Years).
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
