The S&P 500 has posted gains in the year after every US midterm since 1982. With Americans voting today, history favors stocks, but several macro risks could test that record.
Bitcoin (BTC) has also finished higher a year after recent midterms. However, its path through the following months has been far rougher than that of stocks.
Four Decades of Gains After the Midterm Vote
According to CNBC, the S&P 500 averaged a 13.7% gain one year after the 11 midterm elections since 1982. The index ended higher in every case.
CFRA senior investment strategist Arun Sundaram points to an even longer record. He says markets have never fallen in the 12 months from October of a midterm year since World War II. Those periods averaged gains of about 16%.
“I think that the midterms are a bit of a clearing event. US markets tend to do better once we get past the midterms,” Sundaram told CNBC.
Returns have also been larger when voters split control of Washington. Elections that left divided government saw an average 15% one-year gain, versus 11.5% under single-party control.
CFRA expects Democrats to take the House and likely the Senate. CNBC found a precedent for a Democratic Congress under a Republican president. After the 1986, 1990 and 2006 midterms, the S&P 500 averaged a 10.9% one-year gain.
Sundaram, however, says markets have historically done better under a Republican president and Congress than a Democratic one. He calls a Democratic sweep of Congress the worst case. Still, he says markets tend to be up 12 months later.
A November Tailwind, With Oil and Yields in the Way
The calendar also favors stocks in the near term. Data shared by The Kobeissi Letter shows November has averaged a 2.1% gain since 1980, rising 74% of the time.
In midterm years since 1950, November has averaged 2.7%, with a 78.9% win rate.
Sundaram still calls geopolitics the big wild card this year, especially the war with Iran. CFRA raised its oil forecast and now expects prices to average about $85 a barrel next year, up from $70.
The 10-year Treasury yield slipped below 4.9% on Monday, down from a 5.3% high about a month earlier. Meanwhile, CNBC names artificial intelligence (AI) as the big swing factor now, and whether declines in tech will continue.
Bitcoin Also Climbed After Midterms, the Hard Way
The midterm pattern has also appeared in crypto, though with far larger swings. Data from DWF Labs shows BTC rose 25%, 45%, and 92% a year after the 2014, 2018, and 2022 midterms.
However, BTC took a much rougher path than the S&P 500. It traded 31% below its election-day close three months after the 2014 vote and 46% below after 2018.
Whether either streak extends may depend on oil, yields, and AI as much as on the vote.
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