Investors Need to Get Ready for a Stock Market Correction in 2026. Here’s Why.

Core Insights - National election years create significant uncertainty in markets, particularly during midterm elections, leading to increased volatility in the S&P 500 Index [1][3] - Historical data shows that the S&P 500 has underperformed in the 12 months leading up to midterm elections, with an average return drop of 1.1% compared to a positive return of 11.2% during non-midterm periods [3] - The average negative return during these periods can reach as high as 18%, with a notable 22% decline observed in the 12 months before the 2022 midterms [3] Market Behavior Patterns - The upcoming midterm elections in 2026 are likely to bring heightened volatility, with potential for capped rallies and deeper pullbacks than typically seen in strong bull cycles [4] - A broader three-year market cycle is identified, where strong gains are often followed by a weaker or corrective year, aligning with midterm election cycles [5] - Investors may experience a period of low single-digit returns or increased volatility instead of double-digit annual gains [6] Relevance of Current Timing - The discussion of these patterns is particularly pertinent given the current timing in relation to upcoming elections [7]