A Whirlwind of an Election

A Whirlwind of an Election

If you have spent any amount of time online, watching TV, listening to the radio, or scrolling through podcasts, you have probably noticed the political ads this year have been particularly vicious. Although, is it really all that surprising? After all, it seems that since the late 2010s, both political parties have been at each other's throats quite viciously. With this in mind, you may think that this should have a notable effect on the stock market. On the surface, that claim sounds reasonable. Why wouldn't the stock market be volatile when the members of the most powerful government in the world seem to never be able to agree? You may be surprised to hear that it doesn't have much effect.

Typically, U.S. stock market returns have historically been the weakest in midterm years. ⁷ They carry more uncertainty, more political noise, and as a result, far more investor anxiety. From ongoing overseas conflict, AI fears, and recent inflation data, being an anxious investor seems like the appropriate response. However, as of late October, we have seen that U.S. stocks have delivered a very strong midterm performance. That certainly doesn't mean the year has been smooth, but that's the point this article is trying to make. Volatility does not necessarily mean a diminished portfolio.

The Price Tag on All That Noise

The increased political volatility we have seen has led to staggering political spending. Political advertising spending for the 2026 midterms has already passed $11 billion, surpassing the entire 2024 presidential election cycle. ¹ To put that in perspective, the total for the 2018 midterms was a fraction of what is being spent now. The growth in political spending over just one decade is extraordinary. And nowhere illustrates that better than Texas. The Texas Senate race has become the single most expensive Senate race in American history, with total political ad spending across the state surpassing $1 billion. ²

The point isn't to make a political judgment about any of this. It's to illustrate just how much money, energy, and noise is being directed at voters this year and to ask the question any financially minded person should be asking, is any of this actually moving markets?

Volatility and the Year-End Finish Are Two Different Things

It's important to recognize that the volatility experienced during a midterm year is often very different from what the year actually finishes. Midterm years are historically the most volatile in a four-year election cycle. Markets tend to struggle in the first three quarters as uncertainty builds around which party will take control of Congress. ³ However, once the election is over, the fourth quarter is usually one of the strongest periods in this cycle, averaging 6.6% and advancing 84% of the time. ⁴ The longer-term record is even more striking. Going all the way back to 1950, the S&P 500 has been higher twelve months after every single midterm Election Day on record. Not most of them, all of them. ⁵ Investors who stayed the course through the turbulence were rewarded. Investors who let the headlines make their decisions for them often were not. It's important to recognize that markets do not always go up and we cannot rely on historical data as a guarantee of future results. However, the volatility investors feel during a midterm year and the returns they realize by year-end have repeatedly told two very different stories. Reacting to the former has historically come at the expense of the latter.

Does It Actually Matter Which Party Wins?

The question to end all questions. The intuitive argument is easy to make. Different parties have different tax policies, different regulatory priorities, and different spending philosophies. Surely those differences ripple through to corporate earnings, consumer spending, and ultimately to your portfolio. And they do, to an extent. The effect is consistently smaller and less predictable than the political atmosphere suggests. What history tells us is that markets care more about certainty than which party holds power. We believe the resolution of uncertainty, knowing who is in power and what they are likely to do, is more important to markets than the ideology of the winners.

The more nuanced question is what happens when one party controls both Congress and the White House versus when power is divided. Unified government, a split Congress, and an opposing-party Congress have all produced solidly positive long-term market returns over history. What you may find surprising is that divided government, the outcome many investors instinctively dread, has oftentimes been welcomed by markets precisely because gridlock limits the scope of sweeping policy change in either direction. ⁶ Certainty, even the certainty of stalemate, has historically been preferable to a Congress that faces little opposition and can pass sweeping changes unchecked.

Perhaps the clearest illustration comes from a simple thought experiment. Consider two investors, both starting with the same amount of money in the same broad U.S. stock market index. The only difference is that one moves to cash whenever their preferred political party is out of power, while the other stays invested regardless of who wins. Over the past decade-plus, the investor who let politics drive their decisions ended up with roughly half the wealth of the investor who stayed the course, regardless of which party they were rooting for. ⁶

The Bottom Line

There is so much political noise this year. These political ads are designed to make everything feel urgent and high stakes. While it is important to vote and make your voice heard, your financial plan does not need to flinch every time Washington does. History doesn't suggest ignoring elections entirely. It suggests keeping them in their proper place. A well-constructed portfolio built around your goals, time horizon, and risk tolerance has weathered every midterm election on record, regardless of outcome. The data strongly suggests it will weather this one too.

The best investment strategy heading into Election Day? The same one that worked after every one before it. Stay invested, stay diversified, and resist the urge to let the headlines make your financial decisions for you.

¹ The Wrap / AdImpact. "Midterm Political Ad Spending Hits Record $11.21 Billion." 2026. thewrap.com

² KWTX / Texas Association of Broadcasters. "Texas Political TV Ad Spending Tops $1 Billion as Early Voting Ends Friday." October 29, 2026. kwtx.com | NewsNation. "Texas Senate Draws Record Campaign Spending." 2026. newsnationnow.com

³ Capital Group. "How U.S. Midterm Elections May Affect Markets." capitalgroup.com

⁴ Yahoo Finance. "Every Midterm Election Since 1946 Has Meant One Thing for Stocks." finance.yahoo.com

⁵ Dreyer Wealth Management. "Midterm Elections and the Stock Market: What History Shows Since 1950." dreyerwealth.com

⁶ Kiplinger. "A Split Congress Could Spell Big Stock Gains Into 2027." kiplinger.com

⁷ BlackRock. "What History Says About 2026 Midterm Elections and Market Performance." October 1, 2026. blackrock.com