U.S. Midterm Elections: S&P 500 Gained an Average of 15.1% in the Following Year

Highlights

With the U.S. midterm elections scheduled for November 3, Capital Securities (群益證) cites historical data showing that the S&P 500 recorded positive returns in the year after every midterm election from 1950 to 2022, with an average gain of 15.1%. The index also returned an average of 6.6% in the fourth quarter of midterm-election years. However, election-related sentiment may be less important to longer-term market performance than corporate earnings, AI capital expenditure, and interest-rate changes. The company highlights technology growth, diversified allocation, and bond income as investment considerations, while noting risks from elevated Treasury yields and short-term volatility in Taiwanese stocks.

Historical gains are not a guarantee: the article emphasizes business fundamentals and long-term industry demand over short-term election reactions.

Sentiment Analysis

• The article has a cautiously positive tone. Its historical data is encouraging: the S&P 500 produced positive returns in the year after every midterm election between 1950 and 2022, averaging 15.1%, while the fourth quarter of election years averaged 6.6%. These figures provide a constructive backdrop but are not presented as a prediction or guarantee.


• Its outlook is also grounded in longer-term growth themes. Technology, semiconductors, artificial intelligence, data-center expansion, and related electricity infrastructure are described as areas supported by sustained demand and, in some cases, bipartisan policy priorities.


• At the same time, the article recognizes meaningful risks. Elevated U.S. Treasury yields could weigh on technology-stock valuations, and Taiwanese stocks may fluctuate after recent gains. It therefore encourages attention to earnings, capital spending, and interest rates rather than treating election outcomes as the sole investment signal.


• Overall sentiment: moderately positive with explicit caution. The bar reflects the constructive historical and structural themes, tempered by market and valuation risks.

Article Text

The U.S. midterm elections are scheduled for November 3. Ahead of the vote, Capital Securities (群益證) points to historical stock-market performance as one reference for investors assessing the period around the election. Its review finds that the S&P 500 delivered a positive return in the year following each midterm election from 1950 to 2022. Across those periods, the average one-year gain was 15.1%. The average return in the fourth quarter of midterm-election years was 6.6%.

These historical results describe past market performance; they do not establish that similar returns will necessarily occur after a future election. Elections can affect investor sentiment and expectations about policy, but the firm argues that political outcomes alone do not determine the direction of markets over time. Corporate earnings, industry growth, investment activity, and changes in interest rates are among the factors it identifies as more relevant to assessing subsequent market conditions.

In particular, the firm points to AI-related capital expenditure and the development of technology industries as considerations for investors. It says that investment choices should account for business performance and the capacity of industries to grow, rather than relying only on short-term changes in market mood around voting and policy announcements. Its broad allocation themes are technology growth, diversification, and income from bond interest.

Looking at policy priorities associated with both major U.S. parties, Capital Securities identifies technology competitiveness, semiconductor supply-chain security, energy infrastructure, and the defense industry as areas with bipartisan support. The company notes that artificial intelligence and semiconductors are connected to the United States’ position in technology. It also links the expansion of data centers and rising electricity demand with investment in supporting infrastructure.

That perspective shifts attention from the immediate election cycle to the underlying demand for products, services, and infrastructure. Technology and semiconductor businesses may benefit from ongoing investment in AI and computing capacity, while the construction and operation of data centers can increase requirements for power and related facilities. The article presents these themes as developments worth following, rather than as assurances of future returns.

The central distinction is between short-lived election-driven sentiment and longer-term forces such as earnings, AI investment, and industry demand. Capital Securities considers industries with durable demand and policy backing more relevant to ongoing investment analysis than short-term political shifts. The article does not suggest that all companies in these industries will perform alike; instead, it highlights broad themes for investors to monitor.

The company also outlines risks that could affect markets. U.S. Treasury yields remain relatively high, and elevated yields may put pressure on technology-stock valuations. In Taiwan, stocks that have already risen substantially in the short term may experience volatility. These considerations temper the positive historical data and the longer-term technology outlook.

For exposure to potential medium- and long-term growth in AI and semiconductors, Capital Securities suggests considering Asian technology equity funds. The recommendation is presented alongside its broader emphasis on diversification and bond-interest income, rather than as a claim that a particular investment will guarantee gains. Taken together, the article frames the election as one factor in the market environment, while directing attention to fundamentals, interest rates, and structural industry trends when evaluating investment opportunities.

Key Insights Table