Patten Financial Group | Valparaiso, Indiana | Serving Northwest Indiana and Greater Chicagoland
Quick Answer
Midterm elections often bring headlines, uncertainty, and short-term market swings. Historically, though, the outcome of a midterm election has had little lasting effect on long-term portfolio results. Going back to 1950, the S&P 500 has delivered positive returns in the 12 months following every midterm election, with an average gain of about 15%, according to J.P. Morgan Asset Management. Past performance does not guarantee future results. For most pre-retirees and retirees, the more productive move is to review how your plan handles volatility and to keep an eye on the policy areas Congress controls: taxes, Social Security, and Medicare. Trying to reposition a portfolio around who might win is rarely the answer.
Why Midterms Feel So Important to Investors
With Election Day on Tuesday, November 3, the news cycle is full of forecasts, polls, and predictions about what control of Congress could mean. It’s natural for that noise to spill over into how people feel about their savings, especially if you’re within a few years of retirement or already drawing income from your portfolio.
Our firm doesn’t take sides on parties or candidates, and this article won’t either. Our goal is simpler. We want to help you separate what history actually shows from what the headlines suggest, and to focus on the parts of your financial plan you can control.
What History Shows About Markets in Midterm Years
Midterm years have tended to be bumpier. Capital Group, which studied more than 90 years of market data, found that since 1931, the S&P 500 has returned an average 4.7% during midterm years, versus 9.5% in all other years. Their research also shows that the months leading up to Election Day in midterm years exhibit higher average annualized volatility than non-election years.
The year after has historically been stronger. Once results are known and uncertainty fades, markets have often moved higher. Capital Group’s research puts the average one-year return at 15.4% following midterms since 1950.
Which party wins Congress has mattered less than people expect. Capital Group argues congressional control has had little consistent impact on long-term investment performance. Midterms also follow a fairly predictable political pattern: the incumbent has lost House seats in all midterm elections except for three since 1934. Markets generally have years to anticipate that kind of shift.
History is a guide, not a guarantee. Recent midterm years are a good reminder. According to Morningstar data, the two most recent midterm years, 2022 and 2018, were the worst for the S&P 500 since 2008, with declines of 18.1% and 4.4%, respectively. Interest rates, inflation, corporate earnings, and global events can easily outweigh any election-year pattern.
Midterm Elections and the Market: What History Suggests
| Period | What History Suggests | What It Means for You |
|---|---|---|
| Months before a midterm | What History SuggestsHigher volatility, more uncertainty | What It Means for YouExpect noise; don't mistake it for a signal |
| Midterm year overall | What History SuggestsBelow-average returns on average | What It Means for YouShort-term results can disappoint |
| 12 months after | What History SuggestsHistorically above-average returns | What It Means for YouInvestors who stayed the course have often been rewarded |
Historical index data. Indexes are unmanaged and cannot be invested in directly. Past performance is not indicative of future results.
The Real Risk: Letting Headlines Make Decisions
The biggest election-season risk to most portfolios isn’t the election itself. It’s the temptation to react to it.
Some common election-year mistakes we see investors consider include:
Moving to cash “until things settle down.” This creates two decisions you have to get right: when to get out, and when to get back in. Missing even a handful of strong market days can meaningfully change long-term results.
Repositioning based on predicted winners. Sector bets tied to expected policy outcomes depend on an election result, on Congress actually passing legislation, and on markets not having already priced it in.
Pausing contributions or rebalancing. Year-end is when disciplined habits tend to matter most.
For retirees drawing income, the more useful question is not “Should I get out of the market?” It’s “Is my income plan built to weather a volatile stretch without forcing me to sell investments at the wrong time?” That’s a planning question, not a political one. It’s one we can help answer.
Policy Watch: What Congress Actually Controls That Affects Retirees
While elections may not drive long-term market returns, Congress does write the rules that shape your retirement plan. Regardless of the outcome on November 3, here are the areas worth watching:
Taxes. Several recent tax provisions have built-in expiration dates. For example, the higher state and local tax (SALT) deduction cap is temporary, and under current law the cap will revert to $10,000 beginning in tax year 2030. Future Congresses could extend, modify, or let provisions like this expire. That’s one reason multi-year tax planning, including the timing of Roth conversions and charitable giving, matters.
Social Security. The program’s long-term funding remains an open question for lawmakers. The June 2026 Social Security and Medicare trustees’ report states that Social Security’s combined trust funds — which cover old age and disability recipients — will be unable to pay full benefits beginning in 2034. Any fix would require congressional action, so it’s worth understanding how your claiming decision and income plan hold up under different scenarios.
Medicare and healthcare costs. Medicare premiums, coverage rules, and healthcare subsidies are all shaped by federal policy. For pre-retirees planning to retire before age 65, changes to healthcare subsidies can directly affect the cost of bridging to Medicare. (Internal link: https://www.pattenfinancial.com/pfg-blog/medicare-open-enrollment-retirement-plan )
Estate planning. Under current law, the federal estate tax exemption will go up to $15 million per individual in 2026, and the new exclusion amounts do not expire. Even so, estate law can change, and a sound estate plan does far more than reduce taxes.
The takeaway: policy changes generally move slowly, through legislation, effective dates, and phase-ins. That gives planners and families time to adjust thoughtfully rather than react overnight.
Your Election-Season Portfolio Checklist
Use these questions to review your plan before and after Election Day:
Does my investment mix still match my timeline and risk tolerance? A strong or weak market year can shift your allocation without you making a single trade.
Do I have enough set aside for near-term income needs? Retirees often benefit from having one to two years of planned withdrawals positioned so they don’t have to sell during a downturn.
Am I making decisions based on my plan or on the news? If a headline is prompting the change, pause and revisit your goals first.
Have I reviewed my 2026 tax picture before December 31? Roth conversions, required minimum distributions, charitable gifts, and tax-loss harvesting all have year-end deadlines.
Is my plan flexible enough to adapt to tax law changes? Tax diversification across taxable, tax-deferred, and Roth accounts can give you more options regardless of what Congress does.
Are my beneficiary designations and estate documents current? Policy changes are a good prompt to confirm the basics.
Frequently Asked Questions
Do midterm elections affect the stock market?
Midterm years have historically seen more volatility, especially in the weeks before Election Day. Over longer periods, though, economic fundamentals such as earnings, interest rates, and inflation have generally mattered far more than election outcomes.
How has the stock market performed after midterm elections?
Historically, the 12 months after a midterm election have produced above-average returns. J.P. Morgan Asset Management notes the S&P 500 has been positive in the year following every midterm since 1950. Past performance does not guarantee future results.
Should I sell my investments before the midterm election?
Making investment decisions based on election predictions is generally not a reliable strategy. It requires being right about the outcome, the market’s reaction, and the timing of getting back in. A better approach is to confirm your portfolio is aligned with your goals, timeline, and income needs.
Does it matter which party controls Congress for my investments?
Research from Capital Group suggests congressional control has had little consistent effect on long-term market performance. Policy can affect specific areas such as taxes, healthcare, and Social Security, which is why planning matters more than predicting.
What should retirees focus on during election season?
Focus on what you can control: your income plan, your cash reserves for near-term spending, your year-end tax moves, and making sure your plan can adapt to future changes in tax and retirement policy.
The Bottom Line
Elections come and go every two years. Your retirement plan needs to work through all of them. History suggests that staying disciplined and focused on your long-term goals has generally served investors better than reacting to political headlines. The same discipline applies when markets get choppy for any reason. (Internal link: https://www.pattenfinancial.com/pfg-blog/the-fed-just-raised-rates-again-heres-what-it-actually-means )
Let’s Make Sure Your Plan Is Built for Any Outcome
If election headlines have you wondering whether your portfolio and retirement income plan are on the right track, we’d welcome the conversation. Patten Financial Group works with pre-retirees, retirees, business owners, and families across Valparaiso, Northwest Indiana, and Greater Chicagoland to build plans designed for the long term, not the news cycle.
Schedule a complimentary consultation or call us at (219) 312-4128.
Want to dig deeper first? Download our complimentary eBook, A Guide to Retirement Income Planning: Strategies for Sustainable Income by Aaron Patten. It’s a seven-chapter guide to coordinating your income sources and adjusting your strategy as life and markets change.
Patten Financial Group’s retirement income planning press release was featured on NBC, CBS, and ABC affiliate news sites and more than 200 news outlets.
Sources
J.P. Morgan Asset Management, “How do markets perform post-midterms?” https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/on-the-minds-of-investors/how-do-markets-perform-post-midterms/
Capital Group, “How midterm elections may affect markets in 5 charts.” https://www.capitalgroup.com/pcs/insights/articles/midterm-elections-markets-5-charts-2026.html
Investment Officer, “Markets Fear Elections—Then Usually Move Higher” (summary of Capital Group’s election guide). https://www.investmentofficer.lu/en/analyse/document/22645
Time News, “US Stock Market Shows Mixed Reactions After Midterms Historically” (citing Morningstar data). https://time.news/us-stock-market-shows-mixed-reactions-after-midterms-historically/
NBC Chicago, “2027 Social Security COLA increase: Here’s what it means for checks and when” (citing the 2026 Social Security and Medicare Trustees Report). https://www.nbcchicago.com/news/local/2027-social-security-cola-increase-heres-what-it-means-for-checks-and-when/4002339/
UBS Global Wealth Management, 2026 personal tax changes report. https://www.ubs.com/global/en/wealthmanagement/insights/marketnews/article/_jcr_content.0000023273.file/PS9jb250ZW50L2RhbS9pbXBvcnRlZC9jaW9yZXNlYXJjaC9wZGYvMzAvNjEvMTAvMy8zMDYxMTAzL2VuLzMwNjExMDMucGRm/3061103.pdf
Morningstar, “What the New Tax Laws Mean for Your Retirement Plan.” https://www.morningstar.com/retirement/what-new-tax-laws-mean-your-retirement-plan
Patten Financial Group does not support or oppose any political party or candidate. This article is for educational purposes only and should not be considered investment, tax, or legal advice. Historical market data reference the S&P 500 Index, which is unmanaged and cannot be invested in directly. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal. Please consult your tax or legal professional regarding your specific situation.
Investment advisory services offered through Redhawk Wealth Advisors, Inc., an SEC-Registered Investment Advisor. SEC registration does not imply any level of skill or understanding. Redhawk Wealth Advisors and Patten Financial Group are unaffiliated and separate legal entities.
