2026 U.S. Midterm Elections: Historical Market Impact & Sector Trends Analysis

On November 28, 2025, MarketWatch published an analysis of potential 2026 U.S. midterm election impacts on stock markets, citing 100 years of historical data from Longview Economics [1]. The report highlighted:

• The “midterm curse”: Ruling parties typically lose congressional seats
• Pre-midterm market pattern: Common 10%+ S&P 500 pullbacks in the 12-18 months before elections
• Post-midterm opportunity: Strong average returns following elections (5.8% in 3 months, 10.5% in 6 months, 14.8% in 12 months) [1]

• Defensive sectors outperformed on November 28, 2025: Energy (+1.76%), Consumer Defensive (+1.31%), Financial Services (+1.10%) [0]
• Healthcare sector slightly underperformed (-0.117%), contradicting historical midterm patterns where Healthcare is a top performer [0,2]
• No immediate index movement data available for November 28, but November 26 showed modest gains across major indices (S&P 500 +0.28%, Nasdaq +0.22%, Dow +0.49%) [0]

• Historical midterm years show average 19% intra-year S&P 500 decline, 700 basis points higher than non-election years [2]
• Post-midterm period has seen no negative S&P 500 returns since 1942, with average 16.3% gain in subsequent 12 months [3]
• Policy uncertainty reduction post-election typically drives market recovery [1]

• Investors may start rotating toward defensive sectors (Healthcare, Consumer Staples) in anticipation of midterm volatility [2]
• Current market sentiment reflects early awareness of election cycle risks, with Energy leading performance amid geopolitical and policy uncertainty [0]

Metric	Value	Source
Pre-midterm pullback frequency (non-recession years)	12/16 instances with 10%+ decline	[1]
Average 12-month post-midterm return	14.8%	[1]
Average midterm year intra-year decline	19%	[2]
S&P 500 post-midterm win rate (since 1942)	100% positive returns	[3]
November 28 Energy sector gain	+1.76%	[0]
Johnson & Johnson (JNJ) November 28 close	$207.56 (+0.43%)	[0]
Procter & Gamble (PG) November 28 close	$148.25 (-0.16%)	[0]

• S&P 500 (^GSPC): Most studied index in election cycle analysis
• Nasdaq Composite (^IXIC): Tech sector exposure may face policy uncertainty
• Dow Jones Industrial Average (^DJI): Defensive component alignment with historical trends

• Defensive
  : Healthcare, Consumer Staples (historical midterm outperformers) [2]
• Current Leaders
  : Energy (policy-sensitive sector amid election rhetoric) [0]
• Policy-Sensitive
  : Financial Services, Technology (potential regulatory changes) [0]

• Healthcare: Johnson & Johnson (JNJ)
• Consumer Defensive: Procter & Gamble (PG)
• Energy: Exxon Mobil (XOM, implied from sector performance)

• Need to verify alignment of current economic conditions (no recession expected) with historical non-recession midterm patterns [1]
• Lack of data on how specific policy proposals (e.g., tariffs, healthcare reform) may impact sectors [1]
• Unclear how “midterm curse” outcome (ruling party losses) will affect policy gridlock and market sentiment [1]

• Historical
  : Strong post-midterm returns suggest buying opportunities during pre-election pullbacks [1]
• Current
  : Energy sector leadership may indicate investor focus on geopolitical and commodity policy risks [0]
• Risk
  : Pre-midterm volatility could create short-term headwinds despite long-term positive outlook [2]

• Pre-midterm volatility
  : Users should be aware that 10%+ S&P 500 declines are common in the 12-18 months before midterms [1]
• Policy uncertainty
  : This development raises concerns about potential regulatory changes affecting Healthcare, Technology, and Energy sectors [1,2]
• Historical limitations
  : Correlation does not equal causation—midterm patterns may not repeat amid unique economic conditions [1]

1. S&P 500 drawdowns (watch for 10%+ declines in coming months)
2. Sector rotation toward defensive sectors (Healthcare, Consumer Staples)
3. Election polling trends (ruling party’s chances affecting policy expectations)
4. Economic indicators (recession risk that could distort historical patterns)
5. Policy proposals impacting key sectors (energy, healthcare, technology)

: This analysis is for informational purposes only and does not constitute investment advice. Historical performance does not guarantee future results. Investors should conduct their own research before making decisions.