The Stock Market Usually Falls Hard in Midterm Election Years. Wall Street Says This Will Happen in 2026.

Core Insights - The S&P 500 has delivered double-digit returns for three consecutive years, with expectations for continued performance in 2026 despite historical declines during midterm election years [2][4] - Historically, the S&P 500 has averaged an 18% decline at some point during midterm election years, creating uncertainty for investors [4][9] - Post-midterm elections, the stock market typically rebounds, with an average return of 14% in the six months following the elections [6][8] Market Behavior - Midterm elections introduce uncertainty as the ruling party often loses congressional seats, leading to investor hesitation [5] - The S&P 500's performance during midterm election years has varied significantly, with returns ranging from a 38% increase to a 30% decrease [7] - Wall Street analysts predict the S&P 500 will reach 8,085 by January 2027, indicating a potential upside of over 16% from its current level of 6,940 [8] Historical Performance - The S&P 500 has returned an average of 1% during midterm election years, with a notable average decline of 7% in years with a new president [9] - The index has experienced an average intra-year drawdown of 18% during midterm election years, suggesting a similar trend may occur in 2026 [9]