If it's true that stocks rise after elections, will this rebound last? What could break the rebound: Friday's jobs report, next week's inflation data or Iran news?
2026-11-05
The post-election rally statistic is true, but this time the starting point is different
Many analyses say US stocks have risen an average of about 15-16% in the 12 months after midterms (Landmark Wealth, 247WallSt and others, 2026). Institutions also saw a divided Congress as the most likely outcome because it narrows the range of policy change (Morgan Stanley, JPMorgan and UBS forecasts, 2026-10). But the figures differ across blogs and marketing materials, so it is safest to use this statistic only as a range. Averages also do not account for the rate and oil environment at the time of the election. This time the rebound began with the 10-year yield in the 4.9% range and September CPI up at 3.7%.
Three paths that could cut the rebound short
| Path | Timing | Condition for the rebound to continue | Condition for the rebound to break |
|---|---|---|---|
| Jobs | Nov. 6 | Weaker than or in line with September's +29,000 | Much stronger, yields rise again |
| Inflation | Nov. 10 | Slows from September's 3.7% | Re-accelerates, bets on a December hike grow |
| Iran | Ongoing | Progress in talks, Brent below $95 | Escalation, Brent regains $100 |
All three do not need to turn out badly. If oil rebounds, inflation worries grow and yields rise, magnifying the impact of the other two. Iran is the variable that moves first. Evercore ISI warned that if the president escalates militarily before the new Congress is seated in January, the S&P 500 could fall to 6,800 by year-end (Benzinga, 2026-11-04). That is about 11.7% below the current 7,704.69.
The limits of politics itself
Even if Democrats push a tariff repeal and a vote to end the Iran war, Trump can use his veto, and without a two-thirds majority it is hard to override. In other words, what went into today's prices is not a change in law but the absence of new law. Legislative gridlock raises expectations, but positives such as lower tariffs may not materialize. The tools Congress can actually use are limited to investigations and budget checks, which are weak as short-term positives.
What investors can do
- This rebound is one where index ETF prices have already recovered the prior drop in a day. The S&P 500's five-day return is -0.20%. Even if there is more upside, the case for adding before getting past Nov. 6 and Nov. 10 is weak.
- Regular dollar-cost-averaging investors can simply stay the course. Those looking to invest a lump sum should split it across three dates, Nov. 6, Nov. 10 and the Nov. 18 minutes, to reduce volatility.
- The beneficiaries of the Nov. 4 surge were consumer discretionary (XLY +4.51%) and financials (XLF +3.44%). They are favorable only if lower oil and lower yields persist. If oil moves back toward $100, they are the first sectors to be reversed.
- When Iran news arrives, keep in mind the setup where an energy (XLE -5.35%) rebound and an index decline arrive together. Holding some energy ETF acts as a cushion if the conflict escalates.