Midterm Echoes: A Market Observation

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The index, designated S&P 500, has, in recent cycles, exhibited a peculiar adherence to pattern. Three successive years of double-digit advancement – 16%, 23%, and 24% – have concluded, a sequence occurring only seven times previously since the established reckoning of 1926. One begins to suspect a compulsion, a need for the market to fulfill its own internal, unknowable requirements.

The forthcoming year, 2026, remains, of course, shrouded. However, the cyclical occurrence of the U.S. midterm elections in November presents a historical anomaly worthy of… observation. It is not a prediction, certainly. Merely a noting of the ways in which the system seems to repeat itself, a bureaucratic echo in the vast halls of finance.

The Inevitable Diminishment, Followed by… Something Else

The data suggests a consistent, if unsettling, trend. The S&P 500 appears predisposed to a period of… adjustment, a weakening, in the year preceding the midterm elections. This is not necessarily a failure, merely a necessary prelude. And then, invariably, a subsequent period of growth. It is as if the market itself is subject to a rigid schedule, an administrative process from which it cannot deviate.

Midterm Date Largest Drawdown Before Midterm S&P 500 Returns Post-Midterms (12m)
Nov. 8, 2022 (25.4%) 13.6%
Nov. 6, 2018 (10.2%) 12%
Nov. 4, 2014 (7.4%) 4.5%
Nov. 2, 2010 (16%) 2.1%
Nov. 7, 2006 (7.7%) 6.6%
Nov. 5, 2002 (33.8%) 14.9%
Nov. 3, 1998 (19.3%) 22%
Nov. 8, 1994 (8.9%) 25.9%
Nov. 6, 1990 (19.9%) 24.7%
Nov. 4, 1986 (9.4%) 1.9%

These ten midterms are but a fragment of the larger pattern, extending back to 1926. The average return in the twelve months following a midterm election is 13.6%. There were exceptions, of course – 1930 and 1938 – but these can be dismissed as… irregularities in the system, anomalies that do not invalidate the overall observation.

The explanation, if one is required, is simply this: certainty. Prior to the midterms, the future is fluid, contingent upon the outcome of the election. New leadership could introduce new regulations, new tax policies, disrupting the established order. Afterward, a degree of predictability returns. It is not a guarantee of success, merely a reduction in the number of unknown variables. The system abhors a vacuum, and it will fill it with… something.

The Illusion of Prediction

It is crucial to understand that past performance is not indicative of future results. This observation is not a directive to hoard capital until after the midterms, nor is it a justification for reckless speculation. The market is a complex organism, and its behavior is often irrational, unpredictable. To assume that this pattern will continue indefinitely is to succumb to a dangerous illusion.

The S&P 500 has always been a volatile entity, a relentless oscillation between hope and despair. It has weathered countless crises, survived numerous setbacks, and yet it has consistently grown over time. This is not a testament to its inherent wisdom, but rather a reflection of the relentless, unforgiving nature of capital itself.

The most prudent approach, for most investors, is to embrace a strategy of dollar-cost averaging. To invest a fixed amount of capital at regular intervals, regardless of market conditions. This is not a path to quick riches, but rather a slow, methodical accumulation of wealth. It is a recognition that the system is inherently unpredictable, and that the only way to survive is to adapt, to remain consistent, and to trust that, eventually, the numbers will align. Or they won’t. And one will have done what one could.

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2026-02-04 17:44