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

A lot is made of stock market returns during midterm election years. Historically speaking, year three of the four-year presidential election cycle has produced the best returns for the S&P 500 (SNPINDEX: ^GSPC).

According to Fidelity, the index has gained an average of 14.5% in the full calendar year following the midterm elections, with a 95% success rate of delivering positive returns. The next-best performer is year four, with a 9.1% average return and a 72% success rate.

But the good news doesn't stop there. History also shows that we may be entering two of the best months to be invested in stocks.

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October and November have historically been strong in midterm years

Another study points out that the best-performing months within midterm election years are the ones we're just entering now.

Carson Group demonstrates that since 1950, October has produced an average gain of 3% and November a gain of 2.7% in midterm election years. No other month even comes close to generating that kind of return. Both months have a success rate of over 70% in delivering positive returns.

But one other finding from analysts at J.P. Morgan shows that while stock market returns tend to be better in the 4th quarter of midterm election years, the lead-up often struggles to produce much in the way of gains. In 2026, however, the Vanguard S&P 500 ETF (NYSEMKT: VOO) is up about 13% through the first three quarters of the year. Perhaps that means that much of the post-election optimism is already priced in. Or the artificial intelligence (AI) build-out is simply overpowering any election concerns this year.

Should investors be buying stocks right now?

The reason for this midterm-year trend of stocks significantly outperforming in Q4 could be simple. Investors hate uncertainty, and the results of any election could send markets and the economy down wildly divergent paths. The outcome of the election removes that layer of uncertainty and provides a better understanding of what conditions will look like moving forward.

There's also the phenomenon of the party in the White House often losing seats in Congress in midterm elections. That reversal of power can provide more balance to the government and potentially result in a better system of checks and balances that helps improve fiscal restraint.

While there are no guarantees, it's hard to argue with history. The logic behind why stocks tend to rally post-election is sound, and the evidence in numbers is certainly there. The big question is how much of this is already priced in.

Right now, earnings growth expectations are solid, and valuations have come down somewhat. That creates some room for stocks to push higher. I think inflation and interest rate risks are mostly priced in at the moment, and overall sentiment remains positive.

Long-term investors probably don't need to alter their plans at all. Short-term investors should view this as an opportunity to capitalize on historical precedent.

David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.