If you’re worried about midterm elections impacting your portfolio, history might surprise you.

Every election cycle seems to bring the same pattern:

• More headlines
• More predictions
• More uncertainty
• And more anxiety for investors 

But when you step back and look at market history, a different picture starts to emerge.

Markets Often React to Uncertainty More Than Results

Historically, markets tend to become more volatile leading up to midterm elections.

Why?

Because markets dislike uncertainty.

Investors don’t know:

• Which party will gain control
• What policies may change
• Or what economic impacts could follow 

That uncertainty can create short-term market swings and elevated emotions.

But once the election passes and uncertainty begins to fade, markets have historically responded more positively.

In many cases, it’s the lead-up to the election—not necessarily the outcome itself—that creates the most anxiety.

Why Markets Often Like Gridlock

One interesting historical trend is that markets have often performed well under divided government.

Why?

Because gridlock tends to slow major policy changes.

And while political gridlock may frustrate voters, markets often prefer predictability over sweeping legislative changes.

When major shifts become harder to pass, businesses and investors can plan with more confidence.

Economics Matter More Than Politics

While elections dominate headlines, markets ultimately respond more to economic fundamentals than political narratives.

Over the long run, markets care far more about:

• Corporate earnings
• Interest rates
• Inflation  
• Economic growth
• Consumer spending 

Politics may influence short-term sentiment, but fundamentals tend to drive long-term results.

Strong Markets Have Happened Under Both Parties

History also shows that neither political party has a monopoly on strong market performance.

Markets have experienced growth under:

• Republican administrations
• Democratic administrations
• Divided governments 

Over time, the market’s long-term upward trend has persisted regardless of which party held power.

The Real Risk: Emotional Decision-Making

One of the biggest dangers during election cycles isn’t necessarily market volatility itself.

It’s emotional decision-making.

Election years tend to amplify fear and uncertainty, which can tempt investors to:

• Sell investments
• Move to cash
• Delay investing
• Try to time the market based on political outcomes 

Historically, those emotional reactions often create more harm than the elections themselves.

History Since 1938 Is Worth Noticing

One particularly interesting historical observation:

The 12 months following a midterm election have historically been positive for markets dating back to 1938.

That doesn’t mean volatility disappears.
And it certainly doesn’t guarantee future results.

But it does provide important perspective during emotionally charged periods.

Final Thought

Volatility around elections isn’t unusual.

It’s part of investing.

A well-built financial plan already assumes that markets will experience uncertainty, political shifts, economic cycles, and periods of volatility along the way.

The key is staying disciplined and focused on long-term goals rather than short-term headlines.

Because over time, fundamentals—not politics—have historically driven investment outcomes.

https://www.claritywealthplan.com/files/fidelity_midterm_elections_2026.pdf