Election 2026: What History Tells Us About Politics and the Stock Market

Following the November 3, 2026 midterm elections, the Associated Press has called Democratic control of both the U.S. House of Representatives and the Senate. With Republican President Donald Trump remaining in the White House, the country is expected to enter a period of divided government when the new Congress convenes in January 2027.

Although some individual election results remain outstanding, the anticipated change in congressional control raises a familiar question among investors:

How does the stock market historically perform under different combinations of political leadership?

The answer may be more encouraging—and more complicated—than election headlines suggest.

Historical Stock Market Performance by Party Control

We examined annual stock market total returns from 1937 through 2025, comparing performance under different combinations of political control in the White House, House of Representatives, and Senate.

The following table shows the arithmetic average annual total return of the S&P 500 and its predecessor index, including reinvested dividends.

Sources: U.S. House of Representatives historical party-control records and historical annual S&P total returns published by Slickcharts. Figures are independently calculated, rounded, and based on 89 completed calendar years. Party control is assigned by the prevailing configuration during each calendar year. Senate control changed during 2001 and 2002 and is classified as Democratic for those years based on the majority of the year.

What Does History Suggest About the 2026 Election Results?

The anticipated political arrangement—a Republican president and Democrats controlling both chambers of Congress—has occurred during 22 calendar years in our historical sample.

During those periods:

• The S&P 500 averaged a positive 8.6% annual total return.
• The market experienced positive returns in 16 of those 22 years, approximately 73% of the time.
• Results varied significantly depending on inflation, economic growth, monetary policy, and other conditions.

These observations demonstrate that divided government has not necessarily prevented stocks from appreciating.

However, the historical record also includes periods of economic recession, financial crises, and significant market declines. Political control should therefore not be treated as a reliable predictor of future investment performance.

What Matters More Than Which Party Controls Washington?

While elections can influence fiscal policy, tax legislation, government spending, and regulation, financial markets respond to a much broader set of factors.

Corporate earnings, economic growth, inflation, Federal Reserve interest-rate decisions, and company valuations all play important roles in determining investment returns.

Research published by J.P. Morgan Asset Management similarly emphasizes that the underlying economic environment generally provides more useful information about market performance than the political composition of government alone.

Divided government can also affect the legislative process, potentially making major policy changes more difficult or requiring bipartisan negotiation. Whether those developments are beneficial or challenging for financial markets depends on the economic circumstances and specific policies involved.

Our Perspective: Keep the Long-Term Plan in Focus

Election outcomes understandably attract substantial attention, particularly when control of Congress changes.

But history provides an important reminder: successful long-term investment planning should not depend on predicting election outcomes or short-term market reactions.

At Ralicki Wealth Management and Trust Services, our focus remains on investment fundamentals, appropriate diversification, risk management, tax efficiency, and aligning each client's portfolio with their individual financial objectives.

Political leadership will change over time. Economic cycles will continue. Markets will experience both uncertainty and opportunity.

Our goal is to help clients navigate those changes while maintaining perspective and staying focused on their long-term financial goals.

Sources and Research

1. Associated Press — 2026 Midterm Election Results
November 2026 congressional election coverage

2. U.S. House of Representatives — History, Art & Archives
Party Government Since 1857

3. S&P 500 Historical Total Returns
Slickcharts — Annual S&P 500 Total Returns

4. J.P. Morgan Asset Management — 2026 Midterm Election Hub
Historical Market Performance and Government Control

Important Disclosures

Historical market performance is provided for informational and educational purposes only and does not predict future investment results. Annual returns are arithmetic averages, not compounded annual growth rates. The historical S&P series includes its predecessor composite before 1957. Index returns include reinvested dividends but exclude investment management fees, taxes, and transaction expenses. Indexes are unmanaged and cannot be invested in directly. Historical averages reflect differing economic environments and unequal numbers of observations; some political configurations have very limited historical samples. Past performance is not a guarantee of future results. This commentary does not constitute individualized investment advice.

Election information reflects reporting available November 4, 2026, and remains subject to final vote counting and certification.