Skip NavigationVoters cast ballots at a polling location inside John Jay High School during early voting for a primary election in the Brooklyn borough of New York, US, on Sunday, June 21, 2026. Michael Nagle | Bloomberg | Getty Images
As of Oct. 9, some polls and prediction markets are pointing toward a “blue wave” in November’s midterm elections, one that could see the Democrats take a majority in the House and create a tie or take control in the Senate.
Some investors are likely calibrating their portfolios for that possibility, while others are investing based on a spate of Republican victories. That’s because many market-watchers believe that political outcomes, like which party controls Congress or wins the presidency, can have meaningful impacts on the stock market.
But data shows those assumptions are largely false, says Ryan Detrick, chief market strategist at Carson Group, a financial services firm.
“It’s not about red, not about blue; it’s about green,” he says. Though different parties in power may historically correlate with higher stock market returns, a given president or one party in charge “isn’t necessarily good or bad for markets,” he says.
“What matters, of course, for fundamentals [is] the economy, earnings, Fed policy, inflation — all that stuff matters a lot more than if your team is sitting in the White House or not,” he adds.
Here’s what the data shows.
Midterm years are volatile for stocks
Historically, the broad U.S. stock market has trended upward over long periods — and during almost every presidency. Since 1957, all but President Richard Nixon, who resigned midterm, and George W. Bush, whose second term ended amid the global financial crisis, left the market in better shape than when they were elected, according to Invesco research.
Despite the generally positive trend, Detrick notes that midterm years tend to be the most volatile in any given four-year presidential term, based on his analysis of S&P 500 returns from 1950 through 2025. The broad stock market has seen the largest dips, on average, during midterm years compared with any other in the presidential cycle, Detrick’s data shows.
Notably, the larger average pullback seen during midterm years comes with the largest average rebound in the 12 months following the low, Detrick says.
That doesn’t mean you should wait for a midterm dip to scoop up some more stocks. Experts advise against trying to time the market and instead recommend consistently investing in a diversified portfolio and letting compound interest do its thing over time.
“People make irrational decisions at the worst possible time, and then the market does what it does,” Detrick says of investors trying to make money moves based on their expectations of political outcomes.
‘Markets don’t always make a lot of sense’
It’s easy to see why investors may think election results can impact the stock market. Legislators pass laws that can directly impact what publicly traded companies can do. If Congress instituted a nationwide soda ban, for an extreme example, it would be fair to assume Coca-Cola and PepsiCo stocks might fizzle out.
In reality, the stock market has tended to operate fairly independently from politics, Detrick says. Two real-world examples: When President Barack Obama was elected, investors thought that would be good news for environmental, social and governance stocks. That didn’t really prove true — for example, the Invesco WilderHill Clean Energy ETF, a clean energy index fund, saw its price fall by nearly 58% between January 2009 and the end of 2016 as Obama was leaving office. The S&P 500 rose roughly 140% over that time period.
More recently, investors thought President Donald Trump was going to give coal-related stocks a boost, based on his support of coal as an energy source. That didn’t happen during his first term. VanEck Vectors Coal ETF, which tracked coal industry companies before liquidating at the end of 2020, fell roughly 37% from the end of January 2017 through the end of January 2020, before the pandemic triggered a broader market downturn. The S&P 500 rose around 46% over that time period.
“Markets don’t always make a lot of sense,” Detrick says.
Historically, the stock market has performed better under Democratic presidents, his analysis of S&P 500 annual returns from 1951 through 2025 shows. The S&P 500 has averaged annual returns of around 12% under Democratic presidents compared with about 8% under Republicans, per Detrick’s analysis. But Republican-controlled Congresses have typically outperformed Democrat-led legislatures.
A split Congress, when one party controls the House and the other party controls the Senate, tends to be the best for stocks, based on historical returns, Detrick finds.
He attributes that, in part, to partisan gridlock, he says. A unified Congress generally means more spending, he says, regardless of which party is in control. Increased federal spending, which has contributed to the ballooning national debt, can spell trouble for the stock market given it can lead to higher interest rates and Treasury yields.
In that sense, from a stock market perspective, “The joke is ‘the best Washington is one that can’t get anything done,’” he says.
While voters may like to see a more unified Congress that quickly passes certain bills or agendas, the political grind that slows that process down appears to be good for the market.
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