The stock market has had a rough stretch lately. The S&P 500 is down about 1.5% over the past month, but that headline number hides a sharper decline beneath the surface. The tech-heavy Nasdaq has fallen more than 5%, and the Philadelphia Semiconductor Index—which tracks chipmakers—has plunged nearly 15%.
With the busiest week of earnings season underway and the US midterm elections just days away, you might be tempted to sit on the sidelines until the dust settles. But history suggests that waiting could come at a price.
A 50-year track record
Since 1974, the S&P 500 has risen in the six months following every single midterm election. That's 13 elections, 13 gains, and an average return of roughly 12%, excluding dividends. The streak is remarkable not just for its consistency, but for what it implies: the period after midterms has historically been one of the most reliable bullish windows for stocks.
Why does this pattern hold up? Midterm elections often bring a change in the balance of power in Congress, which can reduce the likelihood of major new legislation. That uncertainty—about what Washington might do next—tends to weigh on markets in the months leading up to the vote. Once the results are in, that uncertainty lifts, and investors refocus on fundamentals like earnings and economic growth.
It's also worth noting that midterms typically occur at a point in the presidential cycle when markets have already absorbed the initial shock of a new administration's policies. By the two-year mark, investors have a clearer picture of the regulatory and fiscal landscape, which can support risk-taking.
What's happening now
The current market weakness is being driven by a few factors. Tech and semiconductor stocks have been hit particularly hard, as investors worry about slowing demand, rising interest rates, and the potential for tighter regulation. The Nasdaq's 5% drop and the chip index's 15% plunge are significant moves, especially after a strong run earlier in the year.
Earnings season is also in full swing, with major companies reporting results that are being scrutinized for signs of weakness. Some companies have beaten expectations, but others have offered cautious guidance, adding to the nervous mood. For a look at how AI-related spending is affecting tech stocks, see our recent coverage of AI chip spending lifting tech stocks.
Meanwhile, Treasury yields have been creeping higher as markets await the Federal Reserve's next move. Higher yields make future earnings less valuable, which is a particular drag on growth-oriented tech stocks. You can read more about the latest moves in Treasury yields and the Fed decision.
What it means for investors
For everyday investors, the historical pattern is encouraging, but it's not a guarantee. Past performance never guarantees future results, and this time could be different. The economy faces headwinds that didn't exist in previous midterm cycles—persistent inflation, a more aggressive Fed, and geopolitical tensions that can shift quickly.
Still, the consistency of the post-midterm rally is hard to ignore. If you're thinking about waiting for the election results before putting money to work, history suggests you might miss the early gains. Markets often start moving before the outcome is known, and by the time the dust settles, the rebound may already be underway.
That doesn't mean you should make impulsive moves. Rather, it's a reminder that trying to time the market—waiting for the perfect moment to buy or sell—often costs more than it saves. For most investors, staying invested and sticking to a long-term plan is a more reliable strategy than trying to outguess the next few weeks.
If you're concerned about volatility, consider that the market has weathered many elections, wars, and crises over the past 50 years, and it has always eventually moved higher. The midterm pattern is just one more piece of evidence that patience tends to be rewarded.
As the election approaches, keep an eye on how the results might affect sectors like healthcare, energy, and technology, where policy changes can have outsized impacts. But for the broad market, the historical odds are on your side.
