S&P 500 Surges 33% Post-Election: Why Midterm Volatility Shouldn’t Derail Your Portfolio

Key Points

• The S&P 500 has climbed 33.5% since President Trump’s reelection in November 2024.

• Historical data shows strong equity returns do not reliably predict midterm election outcomes.

• The optimal investment approach remains consistent regardless of which party controls Congress.

Despite widespread recession fears among economists and consumers, the equity market has sustained a multi-year rally. As the midterm cycle accelerates, politicians across the aisle are quick to claim credit for the bull run while attributing any downside to their opponents’ policies.

Since President Donald Trump’s reelection on November 5, 2024, the S&P 500 (SNPINDEX: ^GSPC) has advanced 33.5%, outpacing the historical average. This gain persists despite brief corrections triggered by the “Liberation Day” tariff announcements and the outbreak of conflict with Iran.

Image source: Official White House Photo by Molly Riley.

Midterm Madness

Even with the market’s robust performance over the past two years, assuming that equity strength guarantees a specific electoral result in November would be an error.

During Trump’s first term, the S&P 500 delivered a cumulative return of 81.3%—its fourth-best four-year presidential term performance since 1980, trailing only Bill Clinton’s two terms and Barack Obama’s first term. Yet that momentum did not secure a second term for Trump in 2020. Similarly, the strong first-term markets under Clinton and Obama failed to prevent their parties from losing seats in their respective first midterms.

Consequently, investors should not reposition portfolios to bet on a particular electoral outcome. Instead, they should structure holdings to withstand any result.

The Real Impact

Markets despise uncertainty. As the election approaches within 60 days, a clear polling advantage for one party typically steadies equities. Conversely, inconclusive polling injects volatility, which intensifies if control of the House or Senate remains unresolved due to delayed or contested counts.

Such turbulence is historically short-lived and unlikely to disrupt the fundamental drivers behind the S&P 500’s recent outperformance: expanding corporate earnings, robust business investment—particularly in artificial intelligence—and resilient consumer spending. Payroll growth has rebounded from 2025 lows, layoffs remain subdued, and while inflation persists as a concern, it has not meaningfully curtailed household or corporate outlays.

Ultimately, the market has climbed despite tariffs and the energy-price shock stemming from the Iran conflict. Those conditions now represent the baseline. Should the midterms alter the policy landscape, the likeliest shift would be toward fewer tariffs and lower energy costs rather than the reverse.

In short, the most probable post-midterm environment is a continuation of current growth dynamics. The prudent strategy for investors today is to stay the course.

Source link