With the November midterm election drawing closer, political campaigns are ramping up across the country. Politics have become increasingly divisive in recent decades, and it is natural for investors to ask whether election results should influence their financial decisions. Now more than ever, it is important to keep political views separate from investing and to avoid letting election outcomes drive portfolio decisions.1
Midterm elections take place every four years, halfway through a presidential term, and they determine which party controls Congress. Current polls suggest that a divided government is the most likely result, but margins are very close in both chambers, meaning much could change in the months ahead.2 In the House of Representatives, a party needs 218 seats for a majority, and Republicans currently hold 219 seats, so Democrats would need to flip only a small number of races to take control. In the Senate, Republicans hold a stronger position with 53 seats, though prediction markets have been shifting in their expectations.3
As citizens, voters, and taxpayers, elections matter enormously. They shape government policy on issues such as benefit programs, taxes, and the national debt. Even so, investors do not need to get caught up in every political detail. History shows that what happens in Washington tends to matter far less to long-term investment outcomes than many people expect. So why is this the case, and how can investors stay on track as the election season heats up?
Midterm election years have generally delivered positive market returns
It can feel natural to assume that politics should move the stock market, and that investors might be better off avoiding election years entirely. Because elections affect economic policy, which in turn affects businesses and industries, it seems reasonable to expect that election years might simply be more unpredictable.
History, however, tells a different story. The chart above shows that market returns have been positive on average across different types of election and non-election years, going all the way back to the Great Depression. While there is some natural variation between these averages, markets have performed well under Republican administrations, Democratic administrations, and divided governments alike.4
This does not mean that every year produces gains. Each period is shaped by its own unique circumstances, depending on where the economy stands at the time. Recent midterm election years illustrate this point well. In 2022, markets fell significantly due to high inflation following the pandemic, and in 2018, concerns about global growth and central bank policy weighed on returns. In both cases, the negative performance was driven by underlying economic conditions, not simply by the fact that a midterm election was taking place.
Longer-term market trends have also often had little connection to politics. The technology revolution that began in the 1990s, the housing boom and bust of the mid-2000s, the inflationary impact of the pandemic after 2020, and the current wave of AI innovation have all shaped markets in meaningful ways that had little to do with which party controlled the White House or Congress.
It is also common for a president who begins with a majority in Congress to lose that majority during a midterm election. In recent decades, this happened to President Biden during his single term, President Obama during his first term, President George W. Bush in his second term, President Clinton in his first term, and others. Political scientists have studied many reasons for this pattern, including how voter preferences and attitudes tend to shift two years into a four-year presidential term. Regardless of the exact causes, both markets and the broader economy have continued to grow steadily across these decades.
The state of the economy has a greater effect on portfolios than election results
For investors focused on the long term, the business cycle (the natural expansion and contraction of the economy over time) and interest rates have historically been much more important drivers of market performance than which party holds power in Washington. The chart above highlights how the current period of elevated interest rates is affecting markets, businesses, and consumers. While policymakers can influence interest rates to some degree, they are ultimately shaped by longer-term economic forces.
This is an important point because political change tends to happen gradually and with delays. The difficulty of sustaining majorities in Washington reflects how our political system was designed to work. Even when policy shifts appear significant, such as changes to taxes and tariffs in recent years, they often do not have as large or as immediate an impact, positive or negative, as some might predict. This is because economic growth, corporate earnings, inflation, and employment are all influenced by many other important factors at the same time.
This year's election is taking place against a backdrop that includes geopolitical conflict, inflation, and concerns about AI. These factors have had a far greater influence on markets, corporate earnings, and interest rates than the details of individual Congressional races. Yet despite short periods of uncertainty, major stock market indexes have still produced double-digit returns. This is a reminder that while the midterm election is happening this year, it is important to focus on the broader environment rather than the election itself.
Markets have grown steadily across administrations of both parties
Perhaps the most valuable perspective for long-term investors is that markets have performed well across many different political environments. The chart above shows that the S&P 500 has grown over the past century, spanning different political periods, wars, recessions, policy changes, and much more.5
This does not mean that policy is unimportant or that markets never experience ups and downs. Debates over tax rates, defense spending, and the national debt can have real consequences for the economy over time. The outcome of this election could influence the legislative agenda, including the direction of the conflict with Iran, tax provisions, tariffs, and the trajectory of the national debt. These are issues that many investors follow closely.
The key, however, is to distinguish between what investors can and cannot control when it comes to their portfolios and financial plans. Voting is an important way to make your voice heard, but it is equally important not to let election outcomes drive decisions about your hard-earned savings. Instead, building a portfolio designed to hold up across a range of economic and political environments is a more reliable approach than trying to predict the outcome of any single election.
The bottom line? Midterm elections matter greatly for the country, but it is important to keep politics separate from investing. History shows that staying disciplined and focused on the fundamentals, even during election years, is the best path toward achieving long-term financial goals.
References
1. https://www.usa.gov/midterm-elections
2. https://www.realclearpolling.com/latest-polls/2026
3. https://polymarket.com/event/balance-of-power-2026-midterms
4. Clearnomics research and Standard & Poor's data, as of August 7, 2026
5. Clearnomics research and Standard & Poor's data, as of August 7, 2026
Index Descriptions
S&P 500
The Standard & Poor's 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The modern design of the S&P 500 stock index was first launched in 1957. Performance prior to 1957 incorporates the performance of the predecessor index, the S&P 90.