2026 Is Outperforming the Average Midterm Year
Midterm election years have historically been more volatile than other years, and they’ve historically delivered weaker returns. This year has followed a very different path.
For your convenience, we’ve also provided a PDF copy of the Chart of the Month | 2026 Is Outperforming the Average Midterm Year.
The S&P 500 has gained nearly +12% year-to-date. For comparison, the average midterm year is historically flat at the same point, while the average non-midterm year is up nearly +9%. This year has outperformed not only the typical midterm year but also the average non-midterm year. The chart below compares the S&P 500’s year-to-date price return against the average return path of midterm and non-midterm years since 1978, with each year indexed to 100 at the start of the year.
The explanation for the historical midterm pattern is that these years carry an unusual amount of policy uncertainty around future taxes, spending plans, and regulatory changes. Investors generally dislike unresolved questions. Markets have been volatile this year, but the source has been geopolitical and macroeconomic rather than electoral. The S&P 500 fell -5% in Q1 before rebounding more than +20%. Geopolitical tensions have contributed to sharp moves in oil prices, long-term Treasury yields have climbed to multi-decade highs, and uncertainty around the Federal Reserve’s policy has repeatedly shifted the outlook for interest rates. The volatility midterm years are known for has appeared, but the election calendar hasn’t been the cause, and the weak returns haven’t followed either.
The chart also shows markets have historically traded higher once the election passes and attention returns to earnings and economic growth. Those fundamentals have driven the market this year. Strong corporate earnings have helped support the stock market’s valuation. Artificial intelligence investment has fueled spending on data centers, computer chips, software, and power infrastructure, supporting both company profits and broader economic growth. The economy has also continued to expand, supported by steady consumer spending and business investment. None of these drivers depend on an election outcome. Corporate earnings, interest rates, and consumer demand operate on their own timelines.
This year’s divergence from the historical midterm pattern is a useful reminder of the limits of market averages. An investor could have entered 2026 knowing that midterm years have historically produced more volatility and weaker returns. Expecting a difficult market would have been reasonable. The mistake would have been treating that historical average as a return forecast. Historical patterns are useful because they show what markets have tended to do under similar circumstances. They are less useful when the average becomes a prediction for a single year. The takeaway: Use history as context for what might happen along the way, but don’t use it as a forecast of where you’ll end up.
Disclosure
The information and opinions provided herein are provided as general market commentary only – not financial advice – and are subject to change at any time without notice. This commentary may contain forward-looking statements that are subject to various risks and uncertainties. None of the events or outcomes mentioned here may come to pass, and actual results may differ materially from those expressed or implied in these statements. No mention of a particular security, index, or other instrument in this report constitutes a recommendation to buy, sell, or hold that or any other security, nor does it constitute an opinion on the suitability of any security or index. The report is strictly an informational publication and has been prepared without regard to the particular investments and circumstances of the recipient.
Past performance does not guarantee or indicate future results. Any index performance mentioned is for illustrative purposes only and does not reflect any management fees, transaction costs, or expenses. Indexes are unmanaged, and one cannot invest directly in an index. Index performance does not represent the actual performance that would be achieved by investing in a fund.
See Full Disclosures Page
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Blog Disclosures
This content, which may contain security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website or Blog constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
See Full Disclosures Page Here
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Chart of the Month | 2026 Is Outperforming the Average Midterm Year
2026 Is Outperforming the Average Midterm Year
Midterm election years have historically been more volatile than other years, and they’ve historically delivered weaker returns. This year has followed a very different path.
For your convenience, we’ve also provided a PDF copy of the Chart of the Month | 2026 Is Outperforming the Average Midterm Year.
The S&P 500 has gained nearly +12% year-to-date. For comparison, the average midterm year is historically flat at the same point, while the average non-midterm year is up nearly +9%. This year has outperformed not only the typical midterm year but also the average non-midterm year. The chart below compares the S&P 500’s year-to-date price return against the average return path of midterm and non-midterm years since 1978, with each year indexed to 100 at the start of the year.
The explanation for the historical midterm pattern is that these years carry an unusual amount of policy uncertainty around future taxes, spending plans, and regulatory changes. Investors generally dislike unresolved questions. Markets have been volatile this year, but the source has been geopolitical and macroeconomic rather than electoral. The S&P 500 fell -5% in Q1 before rebounding more than +20%. Geopolitical tensions have contributed to sharp moves in oil prices, long-term Treasury yields have climbed to multi-decade highs, and uncertainty around the Federal Reserve’s policy has repeatedly shifted the outlook for interest rates. The volatility midterm years are known for has appeared, but the election calendar hasn’t been the cause, and the weak returns haven’t followed either.
The chart also shows markets have historically traded higher once the election passes and attention returns to earnings and economic growth. Those fundamentals have driven the market this year. Strong corporate earnings have helped support the stock market’s valuation. Artificial intelligence investment has fueled spending on data centers, computer chips, software, and power infrastructure, supporting both company profits and broader economic growth. The economy has also continued to expand, supported by steady consumer spending and business investment. None of these drivers depend on an election outcome. Corporate earnings, interest rates, and consumer demand operate on their own timelines.
This year’s divergence from the historical midterm pattern is a useful reminder of the limits of market averages. An investor could have entered 2026 knowing that midterm years have historically produced more volatility and weaker returns. Expecting a difficult market would have been reasonable. The mistake would have been treating that historical average as a return forecast. Historical patterns are useful because they show what markets have tended to do under similar circumstances. They are less useful when the average becomes a prediction for a single year. The takeaway: Use history as context for what might happen along the way, but don’t use it as a forecast of where you’ll end up.
Disclosure
The information and opinions provided herein are provided as general market commentary only – not financial advice – and are subject to change at any time without notice. This commentary may contain forward-looking statements that are subject to various risks and uncertainties. None of the events or outcomes mentioned here may come to pass, and actual results may differ materially from those expressed or implied in these statements. No mention of a particular security, index, or other instrument in this report constitutes a recommendation to buy, sell, or hold that or any other security, nor does it constitute an opinion on the suitability of any security or index. The report is strictly an informational publication and has been prepared without regard to the particular investments and circumstances of the recipient.
Past performance does not guarantee or indicate future results. Any index performance mentioned is for illustrative purposes only and does not reflect any management fees, transaction costs, or expenses. Indexes are unmanaged, and one cannot invest directly in an index. Index performance does not represent the actual performance that would be achieved by investing in a fund.
See Full Disclosures Page
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Blog Disclosures
This content, which may contain security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website or Blog constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
See Full Disclosures Page Here
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