S&P 500 Historically Rallies After Midterm Elections, UBS Analysis Shows

U.S. equity markets have historically delivered strong returns in the six months following midterm elections, though this period is often preceded by significant volatility in September and October. A research note from UBS highlights a consistent pattern of market performance around the U.S. election cycle dating back to 1950.

A Pattern of Volatility and Recovery

According to the UBS analysis, the S&P 500 has gained an average of 14.5% from the end of August through the end of March in midterm election years. This period, however, typically begins with choppy trading.

• The index has recorded a median decline of 1.4% from the end of August to early October in these years.
• Following this dip, performance has historically strengthened, with the S&P 500 averaging a gain of about 6% from September through year-end, compared to roughly 4% in other years.
• The report, published on Sept. 11, 2026, noted that returns were negative during this post-midterm period in only three instances since 1950: 1978, 2002, and 2018.

Market Expectations and Volatility

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Historically, the party of the incumbent president loses ground during midterms, with an average loss of 25 seats in the House and three in the Senate. The UBS note stated that betting markets at the time of publication implied an over 85% probability of the Democratic party taking control of the House, with the Senate race seen as closer to 50-50.

September and October have historically been the most volatile months for the S&P 500, with price swings being particularly pronounced during midterm years. Analysts at UBS observed that implied volatility, as measured by instruments like the VIX, tends to rise into the third and fourth quarters before compressing after the election.

Context for Investors

While election outcomes can influence the long-term policy outlook for taxes and regulation, UBS emphasized that the market's near-term path is more likely to be dictated by existing administration policies and corporate profit growth. The firm cautioned that past performance is not a guarantee of future results.