History Suggests S&P 500 May Drop 18% Around 2026 Midterm Elections

Macro
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Summary · why it matters

The S&P 500 has historically suffered an average intra-year drawdown of 18% during midterm election years, with declines almost always occurring in the third or fourth quarters. Since 1957, the index has fallen into correction territory in 12 of 17 midterm years and into bear market territory six times, putting the odds of a correction at about 70% and a bear market at 35% in the months ahead. The pattern is driven by policy uncertainty as the party controlling the White House typically loses congressional seats. However, the six-month period following midterm elections has historically been the strongest of the four-year presidential cycle, with the S&P 500 returning an average of 14%. Wall Street expects S&P 500 earnings to increase 24% in 2026, and the median analyst target implies nearly 19% upside from the current level of 7,575 by July 2027. Investors are advised not to sell indiscriminately but to treat any meaningful dip as a buying opportunity.

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