The Democrats won. The market doesn't vote

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The Democrats won. The market doesn't vote

The Democrats took both chambers of Congress, according to US network projections.

I went through all 21 midterm elections since 1942.

Whoever won, the S&P 500 ended higher on June 30th.

November 5th, 2026 · 5 min read

Key takeaways

From the vote to June 30th, the S&P? rose in all 21 years, whatever the result in the Senate and the House.
Averages differ from one result to another, but most groups hold only 3-4 years, and the worst year in every group still ended higher.
The big drops along the way didn't depend on which party won either.
Before the vote, the S&P gave up only 1.1% on a closing basis versus October 23rd, and small caps didn't make new lows.

On Tuesday, Americans voted in the midterms. According to US network projections, the Democrats won both the Senate and the House.

Trump stays president, but from January Congress goes to the Democrats. The question I got most: does everything fall apart now?

To answer it, I ran the full stats on all 21 midterm elections since 1942: who held the majority, who gained it, and what the S&P 500 did next.

Spoiler: it doesn't.

Before the vote

Into the vote, a coin flip

From January 1st to election day, the S&P finished higher in 11 years and lower in 10. This year is the 12th one up: +10.6% through November 3rd.

In midterm years, the market was a coin flip right up to the vote.

The difference shows up after the vote. On October 22nd I showed that from the election to June 30th, the S&P rose in all 21 years.

On average it gained 15.2%. The worst year, 2014, brought 2.5%, and the best, 1942, 30.8%.

11 / 10Years up and down from January 1st to the vote, 1942-2022.

The S&P 500 from January 1st to midterm election day, in every midterm year since 1942.

Which leaves today's question: does it matter who wins?

Senate and House

Who won didn't change the sign

I split the 21 years by result: the party that held its majority or the one that gained it, separately for the Senate and the House.

The results went every which way. In 10 years, at least one chamber changed hands. In 11, nothing changed.

Every result, in the Senate and in the House, ended higher by June 30th, including in its worst year.

Yes, I also checked the case where the party you don't like wins. Still up. The averages aren't equal. When the Democrats had the Senate after the vote, the S&P gained 17% on average. With the Republicans, 11.7%.

But most groups hold 3 or 4 years, and the gap comes down to the era. Before 1991, the Democrats held the Senate almost every time, and the average across all years was 17.6%. After 1991, it was 11.5%.

Since 1991, with the Senate in Democratic hands, the S&P gained 11.9% on average. With it in Republican hands, 11.3%. Practically a tie.

+2.5%The worst year across all groups, 2014. No result took the S&P negative by June 30th.

The average S&P gain from the vote to June 30th, by who held the Senate and the House. All positive, the worst year included.

The road there didn't care about parties either.

Along the way

The big drops had no political color

I also measured how low and how high the S&P went along the way, versus the election-day close. On average, the lowest point was 3.7% below election day, and the highest, 18% above.

Three years had drops of over 10% along the way, each with a different Senate result.

In 1974, the Democrats held everything, and the S&P fell 13.4%. In 2002, the Republicans gained the Senate: -12.5%. In 2018, the Democrats gained the House: -14.7%.

All three still ended higher on June 30th.

2018 is the only year in the data with Trump in the White House. Back then the Democrats took only the House, and the drop had a specific reason, earnings estimates being cut, which I wrote about last week.

The last two times the Democrats took both chambers under a Republican president, in 1954 and 2006, the S&P gained 26.5% and 8.7% respectively by June 30th. Two years don't make a rule.

-3.7%The lowest point along the way, on average, versus election day, 1942-2022.

For each midterm year: how low and how high the S&P went from the vote to June 30th, and where it ended.

Now, to this year.

This year

The pre-vote discount was small

Last week I wrote that the low came on October 23rd. It didn't hold: on October 30th, the S&P dipped intraday to $7,528.

On a closing basis, the lowest was $7,541 on November 2nd, 1.1% below October 23rd. Far less than the 3.6% drop in 2018.

On election day, the index closed at $7,569.

The S&P went below its October 23rd low. Small caps didn't.

The Russell 2000? held above its October 23rd low and, by election day, was up 1.3%, while the S&P was down 0.7%.

The chart below lays the midterm-year paths over the election-day level. It's history, not a forecast. Drops of 10-15% can still come along the way, like in 2018. To me, those are discounts, not a signal to get out.

-1.1%The S&P's biggest drop on a closing basis between October 23rd and the vote, in 2026.

The S&P 500 in 2026, with the historical vote-to-June-30th paths started from November 3rd: the average, best and worst year.

Which brings me to positioning.

How we're positioned

What's new: I'm close to 85% invested, and I want to get close to 100% by April-May 2027. Stocks are about 20% of everything I've invested. The rest is in crypto, mostly Bitcoin and Ethereum.

The election result doesn't make me sell anything. I'll take 2027-2028 profits in stages, following the rule from the November 1st macro report.

Conclusions

Politics swings from one extreme to the other. Today the Democrats win, tomorrow the Republicans, and now we have a president from one party and a Congress from the other.

The market sits in the center. In 21 elections out of 21, it rose into June 30th, whoever won.

If the whole town washes its cars on the same day, it doesn't mean it'll rain tomorrow. Likewise, one vote doesn't change the economic cycle.

The Democrats won. The market doesn't vote

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