The stock market in midterm election years

  • Midterm election years have been weaker for stocks, on average, than others
  • Volatility has tended to be higher, as well, during midterm years
  • Market performance is much different before and after elections

It’s a fair bet that one of the last things most investors want to be thinking about as the year winds down is politics. Unfortunately, it’s probably a pretty good guess that politics will be increasingly difficult to avoid, since midterm elections (MTE) are less than 11 months away.

That also means you can expect to hear about the market’s “tendencies” during these years. Contrary to common generalizations of bullishness, in reality US stocks haven’t done that well during midterm election years.

However, there’s some important fine print to this statement. Although the market has, on average, underperformed before MTEs, it’s tended to outperform after them. To get a better idea of the historical trends, let’s take a look at two distinct periods:

1. January-October (i.e., the first 10 months of an MTE year, through the last trading day of October).

2. October-October (the last trading day of the MTE year’s October to the last trading day of the following October).

The table below compares Dow Jones Industrial Average (DJIA) performance for these two periods, in MTE years vs. all other years—a data window that included 23 MTEs. While the typical January-October performance in MTE years was subpar (+1%), the October-October periods after  elections were a different story—the Dow’s average return was six percentage points higher than in non-MTE years (14.3% vs. 8.3%):

Table 1: Midterm Elections: Dow Jones Industrial Average (DJIA) performance.  Underperformed before midterms, outperformed after.

Source (data): Power E*TRADE (For illustrative purposes. Not a recommendation.)

The table’s bottom row shows how often the two periods posted net gains or losses in MTE years vs. all other years. Once again, the differences were significant: The Dow was less likely to post a gain in the January–October period in MTE years, and more likely to rally in the October–October post-election period. (One aside: Since 1962, the S&P 500 has never lost ground in the October–October period after MTEs, topping the Dow’s 91% win rate, and its 16.3% average gain after elections was nearly twice its return in other years.)

While there’s certainly an observable pattern of pre-MTE weakness and post-MTE strength, it’s important to note how wide the range of outcomes has been over the years—the Dow has gained as much as 26% in the pre-election period and lost as much as 43.29% in the post-election period. The market’s performance in a given year (or month or day) is always subject to unique forces and unexpected events. On that front, Morgan Stanley Wealth Management analysts recently shared some of their thoughts about what could shape the market landscape in 2022.


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1 All figures reflect Dow Jones Industrial Average (DJIA) monthly closing prices, 1929–2019. Supporting document available upon request.

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