When meeting with clients, the conversation can often lead to the current state of politics, gas prices, interest rates, and how expensive groceries have become. With the 2026 midterm elections coming up, I expect those conversations to continue.
For many people, these concerns go beyond politics. They start to wonder what the election will mean for their investments, their retirement savings, and their family's future. Should they make changes to their portfolio? Should they move money out of the stock market until things settle down? These are fair questions. But before making any big decisions, it is important to understand how much politics affects the market.
Politics Matter, But They Aren't the Whole Story
There is no question that elections can affect the stock market and investors need to be aware of legislative risk. But politics are only one piece of a much larger puzzle. Company profits, interest rates, inflation, consumer spending, and events around the world all play a role in how markets perform and any uncertainty can increase movement in the market. With so much information available at our fingertips, we hear about every new development as it happens. It can be easy to focus on each new headline and lose sight of the bigger picture.
However, history can give us some helpful perspective. Since 1938, the S&P 500 has posted a price gain in the 12 months following midterm elections about 95% of the time. A price gain means the index finished higher, not that every investor made money. This does not mean the market will always rise after an election, or that we can predict what will happen after the 2026 midterms. It does show that markets have often moved higher in the year following midterms, regardless of the political uncertainty surrounding them.
We have also seen markets grow during major world events. In February 2022, Russia invaded Ukraine and the S&P 500 dropped around 7% in the following days. Within 2 months, the index fully recovered. Since the invasion, the S&P 500 had risen more than 75%, despite the war and its effects on energy and food prices. That does not mean markets always rise during wars, or that investors are protected from losses when gas prices climb. It is a reminder that markets respond to many factors, and one major event does not determine everything.
That is why we encourage clients not to let their political views to fully dictate their investment decisions. A candidate winning or losing an election or a political party winning or losing control of Congress does not determine what will happen to stock prices next.
The Risk of Making Decisions Based on Headlines
Think about what happens throughout the year. One day, the news suggests the economy is headed in the right direction. The next day, a new poll, political fight, or economic report can make things look much worse. It is easy to let those headlines affect how we feel about our money. When the news is bad, we may want to move our investments to safety. When things look better, we may feel ready to get back into the market.
The problem with trying to time the market based on political opinions is that it can hurt your long-term financial plan. If you sell after the market has fallen, you may lock in losses. If you wait too long to invest again, you could miss some of the market's recovery. No one knows exactly when corrections will happen. And trying to guess based on politics can lead to decisions based on fear rather than your actual needs.
Your Retirement Plan Should Work No Matter Who Wins
For someone nearing retirement or already retired, this matters even more. Because people are living longer, many retirees need their savings to last 20 or 30 years. During that time, there will be many elections, changes in leadership, and shifts in the economy. Your retirement plan needs to account for those changes without requiring you to start over every time the political landscape shifts.
I’m not saying ignore politics. My academic background is in U.S. history and international affairs, so know that I too am following world events closely. New laws and tax rules can affect your retirement income, the taxes you pay, and the choices available to you. Those changes are worth watching and may call for adjustments to your plan. But there is a difference between adjusting a plan when something important changes and changing your investments because you are worried about who might win an election.
The objective is to build an investment strategy around your goals, your income needs, your time frame, and your comfort with risk. That way, you have a clear path to follow even when variables that cannot be controlled make the future feel uncertain.
Keep Your Eyes on What Matters Most
As we head toward the 2026 midterm elections, I encourage you to pay attention to what is happening and vote according to your political conviction. However, regardless of the outcome, try not to let headlines drive a decision about your money. Politics will always be a factor of the market. But it is a much smaller piece of the puzzle than it may seem when you are watching the news every day.
The most important question is not who will win the election. It is whether your financial plan is built to help you reach your goals through the good times, the bad times, and all the uncertainty in between. That is what deserves your attention.
If you have found yourself worrying about what the next election could mean for your money, you are not alone. You can contact us here if you want to talk it through. Sometimes it helps to have someone look at the bigger picture with you. We are here to listen, help you think through your options, and guide you toward what is best for you and your family.