Two Calendars, One Plan
Each fall, many investors find themselves keeping two calendars. The first is the political calendar, with the 2026 midterms just days away on Tuesday, November 3. The second is your financial calendar, which might include year-end tax moves, benefits choices, and goals you've been working toward all year.
And this month, the political calendar is probably commanding most of your attention. Campaign ads seem to run on every channel, polls shift by the day, and the stakes are routinely described as “historic.” With all of that going on, it's only natural to wonder whether your portfolio should be doing something about it.
Our aim is to help you look past the noise and keep your focus on the decisions that matter most for your financial future. Here's why: elections shape policy, but the economy, interest rates, and corporate earnings have had a far greater influence on long-term returns. In this month’s Q-Commentary, we'll walk you through:
- Where markets stand heading into the vote
- What history tells us about midterm election years
- Which policy areas could shift depending on the outcome
- What we believe deserves your focus instead of the headlines
Where Do Markets Stand Heading into the 2026 Midterms?
October started right where September left off, with stocks at record highs and bond yields at levels not seen in more than two decades. Then this week brought the kind of volatility history says to expect in a midterm year, as worries about artificial intelligence spending resurfaced. On October 22, the S&P 500 fell 1.2%, its worst day since July, while the Nasdaq dropped 2.6%. The selling was concentrated in large technology companies, and most stocks in the index actually rose that day. Even after the pullback, the S&P 500 remained up nearly 12% for the year.
Bonds played their traditional role as a cushion. As investors moved toward safety, the 10-year Treasury yield posted its largest single day drop since March 2023 and fell back below 5% for the first time since late September. That compares with a peak of about 5.36% earlier this month, its highest level since 2002. The 30-year yield fell to about 5.32%.
On the Federal Reserve, a hotter than expected September inflation reading of 3.7% briefly pushed the odds of a rate hike at the October 28 meeting above 40%. Those odds have since faded below 10%, but futures markets still see roughly an 80% chance of a hike by December.
Then there’s oil, which remains the wild card. Renewed violence in the Middle East pushed Brent crude above $115 per barrel, a five-month high, reviving concerns about inflation just ahead of the Fed meeting.
The takeaway: once you look past the campaign noise, the forces moving markets this fall are rates, energy, and earnings. Those were the drivers before the campaign season started, and they are likely to remain the drivers after the votes are counted.
How Has the Stock Market Performed in Midterm Election Years?
Midterm years have historically been bumpier than average, but the period around and after the vote has often been one of the stronger stretches of the four-year cycle. Since 1937, the S&P 500 has averaged a 9.2% total return in midterm years versus 13.3% in other years, with higher volatility.
The pattern after Election Day is more encouraging. Since 1950, the fourth quarter of midterm years and the quarter that follows have been among the strongest stretches of the four-year cycle, well ahead of the same quarters in other years.
Source: First Trust; Bloomberg. S&P 500 average quarterly total returns, 1950–2025. Past performance is no guarantee of future results.
So far, this year has broken the usual midterm pattern. Despite a pullback in March tied to events in the Middle East, the S&P 500 gained about 12% year-to-date, its sixth-best start to a midterm year since 1926. History does not repeat on schedule, and past performance does not guarantee future results. But the record is a useful reminder that patience has generally been rewarded more often than reaction.
What Could the Midterms Change, and What Likely Won't?
Republicans currently control the White House and both chambers of Congress by narrow margins. Democrats need a net gain of three House seats and four Senate seats to take control. History has generally favored the party out of power: over the past 23 midterms, the president's party has lost an average of 27 House seats and three Senate seats, and it has gained House seats only three times since 1934. As of October 26, the Decision Desk HQ forecast favors Democrats winning majorities in both chambers of Congress. Not every forecaster agrees, and some still see Republicans as favored to hold the Senate. Forecasts can and do miss, and several Senate races remain toss-ups.
Source: Capital Group; UCSB, The American Presidency Project. Data as of January 15, 2026.
This midterm also has two unusual features. Mid-decade redistricting in several states could shift as many as 10 House seats toward Republicans, and more than 60 House members and 10 senators are retiring. Whichever party wins the House, its majority is likely to be thin, which would limit how much either side can pass on its own.
So, what does this all mean? What matters for your plan is how much policy could actually shift under each scenario. In most areas, the honest answer is "less than the campaign ads suggest."
Two points stand out. First, do markets prefer divided government? Conventional wisdom says yes, because gridlock limits surprises, but the record is more mixed. Since 1933, the S&P 500 has averaged double-digit annual returns under unified government (14.5%), a split Congress (13.8%), and an opposing-party Congress (11.7%). Strong stretches have come under every combination of party control. The economy and outside events have mattered more than the party in power. Second, much of the policy moving markets this year, including tariffs and the Iran conflict, runs through the White House, which isn't on the ballot.
Beyond stocks, the outcome could matter for bonds and the dollar. Some strategists expect divided government to lower uncertainty and modestly support Treasuries and the dollar, while unified Republican control could raise inflation expectations and pressure bonds. Either way, above-target inflation and large federal deficits could keep longer-term yields elevated. The $41.1 trillion debt ceiling is also expected to be reached in 2027, and drawn-out negotiations in a divided Congress could add to volatility. These are forward-looking views, and actual outcomes may differ.
A newer issue to watch is artificial intelligence: data center construction has become a campaign issue over electricity prices and water use. Texas's governor has ordered an audit of data center construction, and Ohio communities have related measures on the November ballot. So far, most state restrictions have been incremental, and projects may be more likely to relocate than stop. For clients in energy and technology, this theme will outlast November.
On taxes, the 2025 tax law made most 2017 individual tax provisions permanent, so a change in congressional control is less likely to bring sudden changes to your income tax rates, though future legislation is always possible.
What Should Investors Do Before the Midterm Elections?
The most useful thing most investors can do before Election Day is to focus on the second calendar: the one that’s actually yours. Here’s how.
Keep politics at the ballot box. Many people feel better about the economy when their party holds power and worse when it doesn't. But acting on that feeling can be costly. Since 2013, $100,000 invested in the S&P 500 grew to about $398,000 by the start of 2026 if left fully invested. An investor who moved to cash whenever their party was out of power would have ended with roughly $186,000 to $214,000, depending on the party. Past performance does not guarantee future results, but the lesson is clear: your vote is the place for your political views, not your portfolio.
Expect some volatility and plan for it. As previously mentioned, the weeks just before a midterm have historically been the bumpiest stretch of the year. Historically, October has been the most volatile month of midterm years by a wide margin. This week’s tech selloff and oil spike are the kind of swings history said to expect.
Source: Capital Group; RIMES; S&P Global. Median annualized standard deviation of daily S&P 500 returns for each month, as of December 31, 2025. Past results are not predictive of results in future periods.
Use today's yields where they fit. With the 10-year Treasury yield near 5%, investors can lock in income at the highest levels in about two decades. For retirees and those close to retirement, rebalancing from stocks after a strong run into higher-yielding bonds may help reduce risk while supporting income.
Review concentrated positions. Many of our clients hold significant stock in their employer, including energy, defense, and technology companies. It's tempting to assume a political outcome will help or hurt a particular industry, but sector leadership has rarely followed a party script. Energy was the worst-performing S&P 500 sector under President Obama and in President Trump's first term, yet among the best under President Biden and so far in President Trump's second term. Technology ranked in the top two under all four. An election is a good prompt to revisit how much of your net worth rides on one company, regardless of who wins.
Finish year-end planning on time. Roth conversions, tax-loss harvesting, charitable gifts, required minimum distributions (RMDs), and open enrollment elections all have deadlines that don't move with the polls. These decisions often have a more predictable impact on your finances than any election outcome.
The Calendar That Matters Most
In just a week, the votes will be counted and the political calendar will reset. Your financial calendar keeps going: the goals you are saving for, the income you rely on, and the people you are planning for.
Elections deserve your attention as a citizen. As an investor, our job together is to keep your plan focused on what you can control. As always, if anything in the headlines is weighing on you, please reach out. That's what we're here for.
