If Republicans lose to Democrats in the November 3 midterm elections and lose both chambers of Congress, the US stock market could get a strong boost. For investors, this is a chance for an S&P 500 rally, but the statistics are based on just seven cases and do not guarantee a repeat.
Since 1954, after each such outcome, the S&P 500 rose over a horizon of three months to a year, averaging 15.5% over 12 months. The risk is that the first month after the vote could be painful, and divided power could slow decisions on taxes and the budget that matter to businesses and ordinary Americans.
How the S&P 500 behaved after a change of power in Congress
US midterm elections take place in the middle of a presidential term, and in such years the autumn market drawdown has historically not been prolonged. Donald Trump could become the president under whom Democrats take both chambers of Congress for the eighth time since 1954, and prediction markets put the odds of such an outcome at 71%.
Election day is taken as the reference point, and the index's return is calculated after one, three, six, and 12 months. On average, after a month the S&P 500 gained 2.1%, after three months — 10.7%, after six months — 17.5%, after a year — 15.5%. The index rose after a month in six of seven cases, and over longer periods — in all seven.
The strongest result came in 1954 under Dwight Eisenhower: over 12 months the S&P 500 rose 33.2%. The index gained 25.1% over the year after the 1990 elections under George H. W. Bush. The only negative came in 1974 under Gerald Ford: in the first month, quotes fell 10.3%, but after six months they were 19.9% above the election-day level.
The annual gain in 1986 under Ronald Reagan was the most modest — just 1.1%. The sample is small, and rates, inflation, and recessions in those years also affected the market, so these data do not prove a direct link between a change of power and a rise in quotes.
The vote takes place on November 3: Americans are re-electing all 435 seats in the House of Representatives and 35 seats in the Senate, and Republicans currently hold both chambers by a narrow margin. Kalshi traders estimated a 66% probability that Democrats would take both chambers, and according to a Fox News forecast the party could win at least 223 of 435 seats in the lower chamber. The fight for the Senate remains more hard-fought. The first results are expected overnight into November 4 Moscow time, and the new Congress will begin work on January 3, 2027.
What else affects the market this week
While the statistics promise gains, Wall Street enters election week after a selloff: on Friday the Nasdaq lost 2.86% and the S&P 500 — 1.82% amid concerns over AI spending. The Nasdaq's decline coincided with rising odds for Democrats, and Mike Wilson of Morgan Stanley allows for the S&P 500 to fall to 7,100 points and sees such a correction as a buying opportunity.
Short-term weakness in midterm election years has historically been quickly followed by gains: since 1950, October and November have never both ended in the red at the same time. In October 2026, the S&P 500 lost 0.9%, and in five similar cases the index gained an average of 4.5% in November.
AI spending frightens investors, but demand for computing itself may prove more important than politics. Investor Jason Calacanis believes demand for AI computing will grow roughly 500-fold and emphasizes that neither midterm elections nor interest rates will stop this trend.
Cryptalist analysis: Market statistics on midterm elections look convincing, but a sample of seven observations over more than 70 years does not have sufficient statistical significance to serve as a standalone trading signal. For the cryptocurrency market, the key factor remains not the party lineup in Congress but the dynamics of liquidity and risk appetite — divided power historically reduces the likelihood of sharp fiscal changes, which tends to support risk assets rather than form a sustained trend.