With the November midterm election drawing closer, political campaigns are ramping up in intensity across the nation. As political divisions have deepened over recent decades, many investors find themselves wondering whether the election should play a role in their financial decisions. Now more than ever, it is essential to keep political views separate from investing and to avoid letting the election influence portfolios and financial plans.1
Midterm elections take place every four years at the midpoint of a presidential term and play a key role in shaping the composition of Congress. Current polling indicates that a divided government is the most likely outcome, though margins in both chambers remain narrow, leaving room for significant shifts in the months ahead.2 In the House, 218 seats are required for a majority, and Republicans currently hold 219, meaning Democrats could take control by flipping just a handful of races. In the Senate, Republicans have a stronger position with 53 seats, though expectations in prediction markets have been evolving.3
As citizens, voters, and taxpayers, elections carry enormous significance. They chart the course of policy on critical issues such as entitlement programs, taxes, and the federal debt. Even so, this does not mean investors should become consumed by the details. History demonstrates that Washington politics have far less influence on long-term portfolio outcomes than many people assume. Understanding why this is the case can help investors stay focused on what matters most as the election season accelerates.
It may seem logical to assume that politics should move markets, and that election years might be best avoided by cautious investors. Since elections shape economic policy, which in turn affects industries and companies, one might expect that election years would be more volatile than others.
History, however, tells a different story. The accompanying chart illustrates that market returns have been positive across a variety of election and non-election years, stretching back to the era of the Great Depression. Although there is some natural variation in the averages across these different year types, markets have performed well under Republican administrations, Democratic administrations, and divided governments alike.4
This is not to say that every year produces positive results. Each period has been shaped by its own unique circumstances tied to the phase of the business cycle. Recent midterm election years are a useful illustration: 2022 saw significant inflation in the aftermath of the pandemic, while 2018 was marked by concerns about global growth and Federal Reserve policy. In both instances, negative returns reflected the underlying economic trends rather than the fact that a midterm election was taking place.
Longer-term market trends have also frequently been driven by forces with little connection to politics. The information technology revolution of the 1990s, the housing boom and bust of the mid-2000s, the inflationary effects of the pandemic after 2020, and the current wave of AI innovation have each left a significant mark on markets in ways that were largely independent of the White House or Congress.
It is also common for a president who enters office with a Congressional majority to lose it in the midterms. In recent decades, this pattern held for President Biden during his single term, President Obama in his first term, President George W. Bush in his second term, and President Clinton in his first term, among others. Political scientists have studied many reasons for this phenomenon, including shifts in voter sentiment midway through a four-year presidential term. Regardless of the causes, both markets and the broader economy have expanded steadily throughout these decades.
The business cycle and interest rates have a greater impact on portfolios than elections
For long-term investors, the business cycle and interest rates have historically exerted a far greater influence on markets and portfolios than the question of which party controls the White House or Congress. The chart above highlights the current environment of elevated interest rates and the effects these are having on markets, businesses, and consumers. While policymakers can influence interest rates to some degree, those rates are ultimately shaped by longer-term economic trends.
This distinction matters because political change typically unfolds gradually and with meaningful lags. The difficulty of sustaining Congressional majorities is itself a reflection of how the political system is designed. Even when policy shifts appear substantial, as has been the case with changes to taxes and tariffs in recent years, their actual effects on the economy are often more modest and slower to materialize than many anticipate. The pace of economic growth, corporate earnings, inflation, and employment are all influenced by a wide range of factors beyond the reach of any single election.
This year’s election is unfolding against a backdrop that includes geopolitical conflict, lingering inflation concerns, and questions surrounding artificial intelligence. These factors have been far more significant drivers of markets, corporate earnings, and interest rates than the outcomes of individual Congressional races. Despite brief periods of uncertainty, major stock market indices have delivered double-digit returns. This context underscores the importance of staying focused on the broader economic environment rather than the specifics of the midterm contest.
Market growth has persisted across administrations of both political parties
Perhaps the most valuable perspective for long-term investors is that markets have delivered strong performance through many different political eras.
The accompanying chart shows that the S&P 500 has grown over the past century, spanning political transitions, wars, recessions, policy changes, and much more.5
This does not mean that policy is without consequence or that markets are immune to volatility. Debates over tax rates, defense spending, and the federal debt can carry real implications for the economy over time. The outcome of the current election could shape the legislative agenda in meaningful ways, including the direction of the Iran conflict, tax provisions, tariffs, and the trajectory of the national debt. These are issues that many investors rightly care about.
The key, however, lies in distinguishing between what investors can and cannot control within their portfolios and financial plans. Voters should absolutely make their voices heard at the ballot box, but that civic engagement need not extend to their savings and investments. Maintaining a portfolio built to perform across a range of economic and political environments is a more reliable path to financial success than attempting to predict the outcome of any single election.
The bottom line?
Midterm elections carry great importance for the country, but it is essential to keep politics separate from investment decisions. History demonstrates that staying disciplined and focused on fundamentals, even during election years, remains the most effective approach to achieving long-term financial goals.
References
- https://www.usa.gov/midterm-elections
- https://www.realclearpolling.com/latest-polls/2026
- https://polymarket.com/event/balance-of-power-2026-midterms
- Clearnomics research and Standard & Poor’s data, as of August 7, 2026
- Clearnomics research and Standard & Poor’s data, as of August 7, 2026
Index Descriptions S&P 500
S&P 500
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The modern design of the S&P 500 stock index was first launched in 1957. Performance prior to 1957 incorporates the performance of the predecessor index, the S&P 90.
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