History Says the Midterm Elections Make October & November a Great Time to Buy Stocks

Historical midterm-cycle data suggest a favorable setup for equities: the S&P 500 has averaged a 14.5% gain in the calendar year after midterms, with positive returns 95% of the time, while October and November have averaged gains of 3.0% and 2.7%, respectively, since 1950. The Vanguard S&P 500 ETF is already up about 13% through the first three quarters of 2026, raising the risk that some post-election optimism is priced in. The article argues that solid earnings expectations, somewhat lower valuations, and largely discounted inflation and rate risks could still support further upside.

Analysis

The seasonal setup is a weak standalone signal because the market enters the event window after a substantial year-to-date advance and with AI leadership carrying a large share of index-level earnings and multiple risk. That changes the usual post-election mechanism: reduced policy uncertainty may support broad beta, but the incremental buyer is more likely to rotate into lagging cyclicals, small caps and equal-weight exposure than add to already-crowded mega-cap AI. A post-election rally led only by NVDA and a handful of index heavyweights would be technically fragile rather than confirmation of a durable risk-on regime.

For the next 1-3 months, the key transmission channel is not the election result itself but whether it changes the expected path for fiscal deficits, tariffs, regulation and Treasury term premium. Higher long-end yields can offset any sentiment relief by compressing duration-sensitive multiples; this is particularly relevant for NVDA, where earnings execution remains exceptional but valuation support requires stable real yields. Watch whether equal-weight S&P 500 (RSP) outperforms cap-weighted SPY and whether the Russell 2000 breaks out versus SPY: those would validate a broadening rally.

Consensus is likely overconfident that historical seasonality provides downside protection. Election resolution can remove one uncertainty while exposing policy-specific winners and losers, and an already-extended index leaves limited tolerance for an earnings or inflation disappointment. The more attractive expression is conditional participation in breadth expansion, not indiscriminate index beta; GETY has no discernible linkage to this macro setup and should not be used as an election proxy.

Key Decisions for Investors

• Do not add outright SPY/VOO beta solely on seasonality. Maintain core exposure, but require RSP to outperform SPY for 10 trading days after the vote before increasing cyclicals; failure of breadth to improve is a signal to keep risk concentrated in quality earnings.
• Initiate a 1-3 month pair only on confirmed breadth: long RSP / short an equivalent-dollar SPY position. The thesis is rotation from concentrated mega-cap leadership into the median constituent; exit if SPY outperforms RSP by 3% after entry or if the 10-year Treasury yield rises sharply enough to pressure all equity duration.
• For existing NVDA exposure, retain the structural long but hedge event-window beta with 1-2 month put spreads on SMH rather than reducing the single-name position. This protects a broad multiple de-rating while preserving upside from company-specific AI demand; remove the hedge if yields stabilize and semiconductor relative strength reaccelerates.
• Set a post-election alert on RUT/SPY relative performance and the 10-year yield. A sustained Russell breakout with stable yields supports adding IWM or regional-bank exposure; a rising-yield, narrowing-leadership outcome favors defensive cash generation over small caps and high-multiple software.