The U.S. stock market is having another fantastic year.
The S&P 500 (SNPINDEX: ^GSPC) is up 11% in 2026
If the benchmark index simply stays at its current level, it will mark the fourth straight year of double-digit gains, something that last happened during the dot-com bubble in the late 1990s. However, the S&P 500 tends to drop sharply around midterm elections, and the stakes are particularly high this year because the Democrats could win control of the House, leaving Congress split. That would make it very difficult for the Trump administration to pass major legislation, which means midterms are a major source of policy uncertainty.
Here’s what investors should know. History says the stock market could drop sharply around the midterm elections Since its creation in 1957, the S&P 500 has consistently performed poorly during midterm election years. The index has suffered an average intra-year drawdown of 18%, and those declines almost always came in the third or fourth quarters.