Why the Midterm Election Should Not Change Your Investment Strategy

With the November election approaching, political campaigns will intensify. Many investors ask whether election outcomes should change their financial strategy. The answer is straightforward: keep your political preferences and your investment decisions completely  separate.

Elections bring uncertainty. Control of Congress could shift. Markets often anticipate those  shifts long before votes are counted. What matters for your plan is not which party wins, but  whether your strategy still aligns with your actual goals and risk tolerance.

History shows that investors who overhaul their portfolios based on election results tend to underperform. You didn't build your plan for a specific political outcome. You built it for your  life.

Midterm election years have generally delivered positive market returns

Many investors assume election years mean extra market risk. Since elections shape  economic policy, it's tempting to think markets behave differently during these periods.  History pushes back.

The chart above shows that stock market returns have been positive, on average, in both  election and non-election years going back to the Great Depression. Markets have performed  well under both political parties and under divided governments alike. Not every year is positive. In 2022, a midterm year with high inflation following the pandemic, returns were  negative. In 2018, concerns about global growth and interest rate policy weighed on stocks.  But notice what actually hurt returns in both cases: the economic conditions at work, not the  election itself.

The economy and interest rates matter more to portfolios than election outcomes

For long-term investors, the business cycle and interest rates have historically been far more  

powerful forces on portfolios than election results. The chart above shows how interest rates are moving through markets, businesses, and consumers right now. Policymakers can nudge

rates, but longer-term economic trends set the real direction.

Political changes move slowly. Even policies that seem huge (tax law, tariffs, spending) rarely  hit as hard or as fast as people expect. Why? Because earnings, growth, inflation, and employment depend on countless moving parts. A president or Congress can shape policy,  but they do not control supply chains, consumer behavior, global trade flows, or business  innovation. Those forces matter more.

Markets have grown steadily across many political cycles

The most reassuring perspective for long-term investors is simple: markets have grown  across every kind of political environment. The chart above shows the S&P 500 expanding  over the past century through wars, recessions, policy swings, and political shifts of all  kinds.

This does not mean policy is unimportant. Tax rates, defense spending, tariffs, and the national debt do affect the economy over time. But investors cannot control those outcomes.  

What you can control is your own strategy. A well-diversified portfolio built to work across  many economic and political scenarios will outperform any attempt to time a single election.

The bottom line? Midterm elections are important for the country, but it's important to  separate politics from investing. History shows that, even during election years, staying  disciplined and focused on fundamentals is the best way to achieve financial goals.

References

1. https://www.usa.gov/midterm-elections

2. https://www.realclearpolling.com/latest-polls/2026

3. https://polymarket.com/event/balance-of-power-2026-midterms

4. Clearnomics research and Standard & Poor's data, as of August 7, 2026

5. Clearnomics research and Standard & Poor's data, as of August 7, 2026

Index Descriptions

S&P 500

The Standard & Poor's 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate  market value of 500 stocks representing all major industries. The modern design of the S&P  500 stock index was first launched in 1957. Performance prior to 1957 incorporates the  performance of the predecessor index, the S&P 90.

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