With the midterms and tariff expiry coming up one after another early next month, is it really true that stocks fall before elections and rise after? Is there anything I should do now?
2026-10-18
The election effect exists in the statistics, but the sample is small
- Since 1962, the S&P 500 has fallen an average of 1.1% in the 12 months before midterm elections. In non-election periods, it rose an average of 11.2% (Barchart).
- Since World War II, both the six and 12 months after elections have been positive, averaging about 13% and 14% (Bank of America).
- The Stock Trader's Almanac also notes that the 1, 3, 6 and 12 months after a decline ended were always higher.
However, Bank of America warns that with rates at multi-decade highs and oil supply unstable, rate and energy shocks could overwhelm seasonality. The election cycle is a reference for volatility management, not a forecast of direction (citing investingLive, 2026-10).
This year, the market has already endured a considerable part of the pre-election decline. The Nasdaq had its worst week since June last week. If the historical pattern holds, it means the period right after the election is more of an opportunity than the period just before it, but this time the election is not the only variable.
Schedule from late October to mid-November
| Date | Event | Market path |
|---|---|---|
| October 28 | FOMC | A hold is favored. Whether it signals a further hike by year-end is the variable |
| October 30 | BOJ decision | Affects the yen and the global rate path |
| November 3 | U.S. midterm elections | Wait-and-see before the election; whether uncertainty clears after the result |
| November 10 | Tariff-related expiry | Volatility in semiconductors and exporters |
What the November 10 expiry actually is
The report described it as the expiry of the reciprocal tariff grace period. What was confirmed in outside sources is somewhat different. In the October 2025 U.S.-China agreement, the U.S. pushed the expiry date of some Section 301 tariff exclusions to November 10, 2026. For additional 301 tariffs on Chinese semiconductors, a new rate is to be set at least 30 days before June 23, 2027, and they are currently suspended at 0% (Washington Examiner, citing the December 2025 Federal Register). So whether this expiry immediately means a semiconductor tariff increase could not be confirmed. The impact depends on how China-related exclusion items are handled.
Scenario branches
- Base path: FOMC holds, the election result clears uncertainty and the tariff expiry is extended or partly adjusted. This is the case where the post-election rebound statistics play out.
- Rate shock path: The FOMC signals a year-end hike and oil stays in the $110s. Even with an election effect, a renewed break of 5.3% in the 10-year yield weighs on stocks first.
- Event overlap path: The election result is narrow, vote-counting delays drag on and tariff news piles on. Volatility rises and the disorder scenario raised in the FT conversation gets priced in. The speaker himself added a caveat that it is unlikely.
What investors should do
- Do not buy or sell everything before the election on a single statistic. Approach in stages between October 28, November 3 and November 10.
- Reduce leveraged products, since liquidation risk is high during the stretch where events are bunched.
- Keep cash and short-term bonds while leaving room to add when the post-election rebound statistics are confirmed.
- The indicators to watch are the 10-year yield at 5.3%, the VIX at 20 and Brent at $110. If these three stabilize, the chance of a post-election rebound rises.