Midterms, the market and what matters

May 7, 2026

Kelly Bogdanova

Vice President, Portfolio Analyst
Portfolio Advisory Group – U.S.

Key points

• The sitting president’s party has almost always lost House seats in
  midterm elections, and those losses have often been large.
  Presidential popularity has played a role.
• U.S. equity returns in midterm election years have been the most
  muted, although gains in the following year have been robust.
• The market has often welcomed political party gridlock in
  Washington—but not always, and less so with a Republican president at
  the helm.
• Election results have not been the main driver of equity prices over
  time. Corporate innovation, Fed policy and economic and earnings
  trends have mattered more.

Five factors framing the election

With all 435 House of Representatives seats and 35 of the 100 Senate
seats up for election on Nov. 3, there are some typical and atypical
factors that could impact political party control in Washington.

A referendum on Trump 2.0

Midterm elections are often a referendum on the president’s term, even
though the president’s name is nowhere on the ballot. And they are usually
tough sledding for the president’s party when it comes to House races.

Since 1906, the president’s party gained House seats only three times in
midterm elections, and the pickups were just single digits. Big losses
were far more common, with Republicans and Democrats each shedding 28
seats on a median basis.

The data suggests presidential popularity played a role.

Since World War II, the two presidents who had high approval ratings in
Gallup polls one month before the midterm election fared best: Democrat
Bill Clinton in his second term and Republican George W. Bush in his first
term. Their parties added five and eight House members in the 1998 and
2002 midterm elections, respectively.

Presidents with approval ratings below 50 percent in Gallup polls one
month before election day in the post-World War II era saw their parties
stumble, with a median loss of 30 seats (range: 9–64 seats); for those
with approval ratings above 50 percent, the median loss was only eight
seats.

The president’s party has often suffered big losses

Change in House of Representatives seats held by the president’s party

• Democratic president

• Republican president

Source – RBC Wealth Management, U.S. House of Representatives,
Brookings Institution, The American Presidency Project at the
University of California, Santa Barbara

The bar chart shows the change in the number of seats in the U.S.
House of Representatives held by the president’s party in midterm
election years from 1906 through 2022. The president’s party gained
seats in only three years: in 1934, Republicans gained nine seats; in
1998, Democrats gained five seats; in 2002, Republicans gained eight
seats. Both Republican and Democratic presidents saw their party lose
seats in 15 years. The worst two years were 1922 (Republican loss of
77 seats) and 1938 (Democratic loss of 72 seats). In the most recent
midterm elections, Democrats lost nine seats in 2022 and Republicans
lost 42 seats in 2018.

This historical pattern is relevant for the upcoming midterm election
given President Donald Trump’s approval ratings have been well below 50
percent in many polls for some time and Republicans currently control the
House by only a narrow margin.

Regardless of where the presidential approval rating sits in the last few
weeks before the November vote—when this rating matters most—there is
little doubt in our minds that this midterm election will be a referendum
on Trump 2.0 given the president’s outsized influence in the domestic
political arena (and on the global stage too).

This has the potential to affect not only House and Senate races at the
federal level but also some “down ballot” state races, shaping political
party control over state legislatures and governorships.

Most House seats up for grabs in many years

Another factor indicating to us that it will be challenging for
Republicans to retain House control is the high number of open seats where
no incumbent is running for office.

Among the 435 total House seats, 57 are open with 37 of those Republican,
as of this writing. This is the second most total vacancies since 1930 and
the largest number of Republican open seats during this period.

Second-highest number of House departures and highest number of Republican
departures since 1930

Number of U.S. Representatives not running for reelection (either
retiring or seeking a different office) by election year

Source – RBC Wealth Management, Brookings Institution “Vital
Statistics on Congress” project (historical data), Associated Press
“Tracking U.S. House retirements” (2026 data, as of 4/29/26)

The bar chart shows the number of elected representatives leaving the
U.S. House of Representatives (those not running for reelection) by
each federal election year (presidential and midterm) from 1930 to
2026. Data from 2026 is preliminary as of April 29. The lowest number
of total departures during the period was in 1984: 22 total, 9
Democrat, 13 Republican. The highest number of total departures was in
1992: 65 total, 41 Democrat, 24 Republican. In 2026, preliminary
tracking data indicates 57 total departures, the second highest number
during the period shown, comprising 20 Democrats and 37 Republicans.
The 37 Republicans exiting the House represent the largest number of
Republican departures during the period.

Many of the vacancies are in districts that will likely be uncompetitive,
where voter registration leans heavily toward one party or the other.

More than anything, the large number of Republican open seats is a marker
to us. We doubt so many Republicans would be moving on if rank-and-file
members felt confident the party would retain House control.

It’s well known inside the Washington Beltway that the majority party
holds more power and perks—this is by design—and these preferences
diminish noticeably for those same members, especially those in
leadership, when party control flips and they are in the minority.

Redistricting shenanigans

The Trump administration and House Republicans set out to improve the
party’s prospects in this midterm election by encouraging
Republican-leaning states to voluntarily redraw their congressional
districts in order to increase the likelihood that Republicans could win
more seats. This process is often called “gerrymandering.”

Among the many criticisms of this process, redistricting can end up
dividing voters within cities or counties who have shared interests,
lumping them together with communities that differ greatly. Both
Republicans and Democrats have engaged in gerrymandering for decades.

This cycle, initially the process did not go as Republicans had planned
because some Democratic-leaning states ended up gerrymandering as well.

It remains to be seen how redistricting efforts could affect the balance
of power in the House. There are some court challenges outstanding, and a
recent landmark Supreme Court ruling about racial gerrymandering in
Louisiana has raised the possibility that additional states could redraw
congressional districts ahead of primary elections.

A high hurdle to flip the Senate

Republicans currently control the upper chamber with 53 of the 100 seats,
and it would take a net gain of four seats for the Democrats to take
control (a 50-50 tie would give the president’s party the majority as the
vice president votes to break ties).

Republicans have a natural geographic advantage this election cycle. Among
the 35 Senate seats up for election, more of them are in red states (those
that tend to vote Republican) than in blue states (those that usually vote
Democratic).

Polls have shown for many months that the Democrats would have to clear a
high hurdle to take control of the Senate. However, a number of pollsters
have recently shifted some seats to the “contested” bucket that just a
couple months ago looked likely to be Republican wins.

Closer to the election, we think the president’s approval rating and
voters’ opinions about their economic prospects and inflation could impact
some key Senate races. Pocketbook issues tend to be the most important
concern of American voters in each and every election.

Independent voters in command

We think independent voters will tip the scales in some hotly contested
House and Senate races this November.

Party loyalty has been decreasing for many years, and more voters now
self-identify as independent rather than as a Republican or Democrat.

These are voters who are not registered as either Republicans or
Democrats, or who are registered to one of these two major parties but no
longer think of themselves as loyal party members or have a low opinion of
both parties.

Independents still growing

Gallup poll question: In politics, as of today, do you consider yourself a
Republican, a Democrat or an independent?

• Democrat

• Independent

• Republican

Democrat and Republican data are the same (overlap) from 2022 to 2025.

Source – Gallup; based on annual averages of telephone interview data,
1988–2025

The line chart shows the self-reported political party affiliation of
U.S. voters (Democrat, Republican, or independent) annually from 1988
to 2025. Democratic affiliation in 1988 was 36% and then was between
31%-34% until rising to 36% in 2008, the peak during this period.
Since then it trended steadily lower and ended 2025 at 27%. The
Republican trend began at 31% in 1988 and trended down to 29% in 1999.
It then moved higher, peaking at 33% in 2005. It moved lower after
that, reaching a low of 25% in 2013 before rising to 27% in 2025, the
same level as the Democrat reading that year. The Independent trend
began 1988 at 33% and moved higher to 39% in 1995. It then moved
lower, reaching 31% in 2004, the low point during this period. Since
then it has moved higher, ending at 45% in 2025, the highest level for
all three political designations.

President Trump won the 2024 election with the help of independent voters,
and many of these supporters perceived their economic prospects would
brighten with his return to the White House.

But since then, independent voters’ assessment of the president’s handling
of the economy has soured. Discontent about ongoing inflation seems to be
a key reason.

Independents and Democrats rather negative about economic issues

AP-NORC poll question: Overall, do you approve or disapprove of the way
Donald Trump is handling the economy and the cost of living?

Source – AP-NORC (The Associated Press-NORC Center for Public Affairs
Research at the University of Chicago); poll conducted April 16–20,
2026 with 2,596 adults nationwide

The graphic shows polling approval ratings for U.S. President Donald
Trump’s handling of two issues: the economy and the cost of living;
ratings are broken down by respondents’ political affiliation
(Republican, Democrat, or independent). On the economy, among all
respondents, 30% approve, 70% disapprove. Among Republicans, 62%
approve, 37% disapprove. Among independents, 19% approve, 80%
disapprove. Among Democrats, 3% approve, 96% disapprove. On the cost
of living, among all respondents, 23% approve, 76% disapprove. Among
Republicans, 51% approve, 47% disapprove. Among independents, 12%
approve, 87% disapprove. Among Democrats, 2% approve, 98% disapprove.

What historical patterns say about the election effect

The big questions for investors are, do elections impact stock market
performance and does political party control in Washington matter for
the market?

Four-year presidential cycle

When we analyze return data within the framework of the four-year
presidential cycle, there are some notable patterns.

Stock market returns in midterm election years tend to be the most muted
of the four-year cycle, with the S&P 500 rising 3.3 percent
on average in those years since 1932. However, gains in the year following
the midterms tend to be the most robust, with the index rising
14.0 percent on average.

Midterm election years tend to be weak, but the following year is
typically strong

S&P 500 performance during the four-year presidential cycle since
1932

Source – RBC Wealth Management, Bloomberg; based on price return data
1932–2025, excluding dividends

The column chart shows S&P 500 price performance from 1932 through
2025, segmented by the four-year U.S. presidential election cycle. In
presidential election years, the average return was 8.1%, median
return 11.8%. In the first year of presidential terms, the average was
7.0% and median 9.1%. In the midterm election year (year two of the
presidency), the average was 3.3% and median 0.6%. In the third year
of presidential terms, the average was 14.0% and median 18.1%.

Midterm election idiosyncrasies

Within the four-year cycle there are market return patterns associated
with midterm elections that are not captured by the annual performance
data, and these patterns have persisted regardless of events in
Washington, and regardless of which party was in power or was gaining or
losing momentum.

In the 23 instances we examined stretching back to 1934, the
S&P 500 typically pulled back or corrected at some point during
the 12-month period before the midterm election. The index declined
20.8 percent, on average.

However, the downside quite often was more than made up for with
subsequent rallies. In those 23 instances, the market was higher at some
point in the calendar year after the midterm election by
46.3 percent, on average.

As is typical with historical market data, there was significant variation
in returns. The data behind the 46.3 percent average gain represents
a wide range—from a 14.7 percent to 87.1 percent gain—although
the market was able to exceed its previous high on 74 percent of the
23 occasions.

Corrections are common in midterm years, and so are follow-on rallies

S&P 500 returns surrounding midterm elections (1934–2023)

* Measured from the peak (within 12 months before the midterm
election-year low) to that low. In 22 of 23 instances, the low
occurred before the midterm election; the exception was in 2018, when
it occurred after the election.

Source – RBC Wealth Management, Bloomberg; performance surrounding 23
midterm election years

The column chart shows S&P 500 performance surrounding U.S. midterm
elections. The average decline reached in the midterm election year
was 20.8%. The decline is measured from the peak within 12 months
before the midterm election year low, to that low. The average gain
from the midterm year low to the high the following year was 46.3%.

It’s also notable that during previous midterm election periods that were
accompanied by inflation challenges, the market reached a new high in the
year after the midterm election less frequently than during
noninflationary periods.

Gridlock is good—sometimes

In terms of political party control, the market has welcomed certain forms
of gridlock in Washington—otherwise known as split or divided government
between the two major parties—but not always.

Our study going back to 1953 found that S&P 500 returns have
historically been the highest in three cases:

• When Democrats have controlled the presidency and the two parties have
  split control of the House and Senate;
• When a Democratic president has served alongside a Republican-controlled
  Congress; or
• When Republicans have controlled the presidency and both chambers of
  Congress

By contrast, returns have been more muted with a Republican president and
either a split or Democratic-controlled Congress.

Elephant or donkey—or both?

Average annual S&P 500 returns since 1953 by party control

Source – RBC Wealth Management, Bloomberg; based on price return data
1953–2025, excluding dividends

The column chart shows historical average S&P 500 annual returns under
various scenarios of party control of the U.S. federal government. The
S&P 500 rose 13.3% during periods of a Republican sweep (when the
party controlled the presidency and both chambers of Congress). It
rose 7.3% when the Republicans controlled the presidency and control
of the Congress was split between Republicans and Democrats. It rose
4.9% when Republicans controlled the presidency and the Democrats
controlled both chambers of Congress. It rose 8.0% during periods of a
Democratic sweep. It rose 17.0% when Democrats controlled the
presidency and control of Congress was split between Republicans and
Democrats. It rose 16.3% when Democrats controlled the presidency and
Republicans controlled both chambers of Congress.

Elections matter, but economic fundamentals matter more

Americans and observers outside the country who are interested in politics
and public policy rightly assign high importance to U.S. election
outcomes.

The data demonstrates there are indeed market performance patterns
associated with midterm election years that we believe are worth paying
attention to and respecting.

We are aware that the midterm election sample size is not large enough to
permit one to draw conclusions supported by high “statistical confidence.”
That said, the data is very suggestive.

• In midterm elections, the sitting president’s party almost always loses
  seats and often those losses are large
• The U.S. stock market has usually encountered a noteworthy correction in
  that year, which also has consistently been the lowest-performing year
  of the four-year presidential cycle
• That correction has typically been followed by a robust rally in the
  calendar year following the midterm election, most often taking the
  market to new highs and making that year the strongest of the four-year
  cycle

In our assessment, however, elections and political party control in
Washington are not the main drivers of U.S. stock prices over time. We
think other issues have historically impacted the U.S. market more:

• Corporate innovation trends
• The Federal Reserve’s monetary policy decisions
• The natural ebb-and-flow of the business cycle and economy
• Related corporate earnings trends

When it comes to asset allocation recommendations, we focus on domestic
economic and corporate earnings fundamentals, and specifically on
indicators associated with recession risks. It’s recessions that are
usually responsible for ushering in equity bear markets.

We don’t think the approaching midterm election or its outcome in terms of
party control of the House and the Senate are reasons for long-term
investors to change their allocation to U.S. equities in portfolios.

RBC Wealth Management, a division of RBC Capital Markets, LLC, registered investment adviser and Member NYSE/FINRA/SIPC.

Vice President, Portfolio Analyst
Portfolio Advisory Group – U.S.