Catenaa, Sunday, November 01, 2026- US stock market performance has historically accelerated in the year following midterms since 1950, according to HSBC.
Historical market data examined by HSBC Asset Management indicates that US equities have generally performed more strongly in the 12 months following midterm congressional elections since 1950.
“Of course, correlation is not causation, and political calendars do not drive markets alone,” HSBC said.
HSBC cautioned that previous stock-market gains following midterms occurred alongside broader economic developments, including declining inflation during the 1980s, technology-sector expansion in the 1990s and monetary stimulus after the global financial crisis.
According to HSBC, after moving in lockstep for much of the year, US large- and small-cap stocks have mirrored this divide, splitting into a K-shape since late summer.
HSBC said that the S&P 500 remains buoyed by bumper megacap earnings, despite lingering concerns over AI capex plans.
“Meanwhile, the rate-sensitive Russell 2000 has fallen as markets price in more aggressive Fed tightening – current expectations of three more hikes imply a peak funds rate of over 4.50% in 2027,” the bank said.
“Markets dislike uncertainty, and once midterms pass, investors gain clearer visibility on the policy agenda. If the administration loses one or both chambers of Congress, it may lean more on executive actions and trade policy – yet divided government reduces the risk of sweeping fiscal or legislative surprises.” HSBC said,
However, HSBC said other volatility drivers remain, including inflation, rates, and AI.
The latest opinion polls suggest the Democrats will gain a majority in both the House of Representatives and the Senate.
Given how strongly markets have run in recent years, HSBC said that another 20% gain is a tall order to, yet after a stretch where political events – from “Liberation Day” to Iran – rattled sentiment, clearing the midterms can turn politics from a headwind into a welcome market tailwind.
