A Calendar of Uncertainty: Midterm Elections Edition

A biennial tradition like none other, the US election season is upon us. The fight over who gets a vote to participate in controlling a $7.4 trillion budget, the largest ever, generates headlines and ad revenue that networks salivate over. Midterm elections (non-presidential years) often show repetitive themes that affect markets as well. What can you expect for your portfolio before and after this unusual period?



Overview



With two-year terms, the House of Representatives will run all 435 seats. These short office-holding periods contribute to more radical changes from cycle to cycle than the governorships or Senate, which come with 4 to 6-year terms, respectively. Predictions show that the Democrats look likely to overtake the House from the Republicans. In the Senate, the stakes consist of 35 seats. Democrats need a net gain of four seats to reach 51. Republicans can lose three and still organize the Senate with Vice President Vance as the tiebreaker. Of the positions at risk, the split is 22 held by the right and 13 held by the left. Polls believe that the GOP may narrowly hold the Senate although some show a narrowing gap. Additionally, 36 state governorships will be contested along with thousands of state offices. 



Spending on these races occurs at multiple levels. An estimated $12 billion in ad spending for 2026 will also support TV and radio stations across the country. This injection of funds is vital, especially for local stations, accounting for 15-20% of their annual revenue. This is especially true for battleground states that see an influx of cash from everyone from their party, Super PACs, and numerous out-of-state supporters. Streaming is taking an ever-increasing amount as broadcast TV wanes and political consultants reach for new avenues to find swing voters. Campaign workers, sign makers, the U.S. Postal Service, and venues benefit greatly as well. 



Donor Secrets lists typical breakdowns below. 







Typical Results



Midterms usually punish the President’s party. This occurs for multiple reasons. Chiefly, it is easier to blame the person in charge for the issues we face. Additionally, upset voters are motivated voters. Satisfied constituents often stay home. This leads to lower turnout, which can make it easier to swing vulnerable seats. Since 1930, the results show a remarkably consistent pattern. Whichever side the President is on loses about 25 seats in the House and a few in the Senate. The only exceptions in the past 100 years were 1934, 1998, and 2002, when the President gained seats for his party.   



A key metric to ascertain what we will see on November 3rd is the Presidential approval rating. A popular Commander in Chief with approval above 50% might mitigate losses and, on average, drop 14 seats according to Gallup. Under 50%, this number grows to over 30 seats. Big wins by Trump and Obama in their first terms skewed the House in their direction. This exacerbated the volume of seats lost in their first midterms. Obama set the modern record with a 63-seat swing. Trump performed poorly as well, losing 41. Biden, perhaps surprisingly, only lost 9, propelled by a controversial Supreme Court decision putting abortion laws back into the hands of the states which drove Democrat turnout. Mastery of gerrymandering, by both parties, seems to be insulating more members from this turnover. Governorships become valuable in this regard as they help pass new legislative maps.  



Market Impact



Returns in midterm election years tend to be the weakest of any 4-year period on the calendar. This is especially true of the period leading up to the vote with stronger performance to follow. 







This makes sense as the market dislikes the unknown. As the parties become more tribal, control of the House becomes a choice between gridlock or (somewhat) normal functioning. An average annual return of 3-7% seems even weaker when you look at the post-election-day results below. Virtually all the gains occur in the 4th quarter. 







Current Outlook



Presidential approval ratings drive turnout and Trump’s are headed in the wrong direction. This chart below shows a dropping “strong approval” rating at 26%, according to Rasmussen as of September 28th, 2026, but also a “strong disapproval” rating of 45%. Overall support is below the key 50% mark at 44% with some polls showing him in the low 30s. 







Key reasons for disapproval include high gas prices spurred on by the Iran War and public tariff fights, most recently with Canada. This aligns with higher inflation than many would like, after he campaigned on lower prices. Recent Fed rate hikes validate this fear: loans for new homes, cars, and business startups get more expensive. Despite this, the S&P is up over 10% YTD. 



What if each party wins? 



If Democrats win, expect a concerted effort to thwart Trump’s agenda. A key focus will be restarting benefits curtailed under the 2025 reconciliation package, aka the “Big Beautiful Bill.” Medicaid and SNAP (food stamps) both saw new work requirements that tightened eligibility, including for non-citizens, among others. Enhanced premium tax credits for Obamacare, introduced during COVID, expired without being renewed. Their ability to do any of these things seems limited. They would need to pass it across both legislative chambers and override a Trump veto. The most likely scenario in my opinion is a lot of hearings and more impeachment proceedings.  



The GOP for their part is mostly following Trump’s lead. Immigration enforcement, deregulation, and the expanded work requirements for benefits. In competitive races, they run against the Iran War and the high gas prices. Medicaid cuts hit some of their districts also. The Centers for Medicare and Medicaid Services (CMS) estimates that 18% of all health care in 2024 was Medicaid dollars ($932 billion). This runs close to Medicare at 21% ($1.1 trillion) and private at 31% ($1.6 trillion). 



Expect more of the same, which is to say “not much” if they win again. The 119th Congress was unusually unproductive, especially for a unified government. They passed 110 new laws compared to 274 for the 118th and 365 for the 117th. They also logged few voting days and hours in session. Some of this can be attributed to a Senate that did not have a large enough majority to pass bills because of the filibuster. With a smaller majority, executive orders will probably continue to be the normal course of getting things done.     



Summary



If history is a guide, we might expect a solid finish to the year for the equity market. Each period is different, though. Returns already outpace a typical midterm election season so we might see a weaker finish than is typical. Trump is also a different politician than what we normally see. His random nature makes a “November Surprise” more likely. A resolution to the Iran War, a scandal with a Senate candidate, or a positive turn for the economy could all swing the results. Clarity often brings positive results no matter what party wins. As always, the best defense is diversification. A portfolio built for good times and bad can help you sleep at night. Even when the calendar shows uncertainty.   



Sources:




Donor Secrets



TheDesk.net



Presidency.UCSB.edu



USPollingData.com



CenterForPolitics.org



NBFWM.ca



RasmussenReports.com



News.Gallup.com




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