October Leads Midterm Year Stock Gains Historically

Historical market data reveals that October consistently emerges as the strongest month for stock performance in U.S. midterm election years, a pattern observed since 1950. According to analysis by Carson Group chief market strategist Ryan Detrick, October has historically delivered an average gain of 3% for the S&P 500, with positive returns occurring 73.7% of the time. This seasonal trend positions October as the leading month for equity appreciation in these specific electoral cycles. Following closely behind, November ranks as the second-best month, averaging a 2.7% gain and showing positive returns 78.9% of the time. Detrick's observations, shared via an X post on September 20, highlight that markets are currently exiting September, which his data identifies as the weakest month of the cycle, averaging a 0.8% decline.

Further substantiating this pattern, research from UBS Global Research examined 19 previous midterm election years since 1950 to assess the impact on equities and their volatility. Their findings indicate that during midterm election years, the S&P 500 has averaged approximately a 6% return from September through the end of the year, a notable increase compared to the average 4% return observed in non-midterm years during the same period. Looking further ahead, the average return through March of the subsequent year has been approximately 14%. The UBS report identified only three instances since 1950 where returns were negative: 1978, amidst high inflation; 2002, during the dot-com bubble burst; and 2018, influenced by trade wars and Federal Reserve interest rate hikes.

UBS strategist Maxwell Grinacoff noted in a research note that the market typically experiences choppiness from late August until early October, with a median decline of -1.4%, before initiating a rally that extends through year-end and into the following year. This rally in U.S. equities around midterm elections has historically outperformed the market's average performance in other years. Equity volatility also follows a discernible pattern, with September and October historically standing out as the most volatile months on record since 1928, particularly in the context of midterm election cycles. This historical data suggests a predictable, albeit not guaranteed, uplift in stock market performance in the latter part of midterm election years.