How will the midterms blue wave affect my 401(k)? Answers here - USA Today

If you own stocks, you might be wondering what the blue wave in the midterm elections means for the stock market and your 401(k).

Does the market flourish after a historic Election Day? Will traders care that American voters ended Republicans' control over Congress?

The answer to both questions, apparently, is yes. 

Morningstar examined 100 years of U.S. stock returns in election months and found that elections tend to boost the market. 

This year is no exception. Stocks exploded out of the gate on Nov. 4, following decisive victories for Democrats across the nation. The Dow Jones opened up 2.1%. The S&P 500 rose 1.8% in early trading. The tech-heavy Nasdaq rose 2.5%.

"The election results have put an end to uncertainty, which is generally welcomed by markets," said Dan Lefkovitz, a strategist for Morningstar Indexes and author of the Oct. 21 report. "Now, the speculation begins around the policy implications and what the election might mean for taxing and spending, regulation and the debt."

Since 1926, Morningstar found, stocks have done better in November in election years than in non-election years. In the average election-year November, stocks have risen by 2.4%. In the average non-election-year November, stocks have risen by only 0.9%. 

“It seems like there is such a thing as a post-election pop,” Lefkovitz said.

November is a good month for stocks, period, Lefkovitz said. It’s a time of rising consumer spending, with the holidays around the corner.

Heading into the 2026 election, news coverage focused on the possibility that the federal government might interfere at the polls or question the results.  

As it turned out, the midterms played out with only minor hiccups at the polls, and without reports of major interference by either party. Many contests weren't even close. President Donald Trump indicated he would accept the results. All of those things should boost the stock market, investment experts say.

"This was a very divisive midterm, and now it's in the rearview mirror," said Chris Grisanti, chief market strategist at MAI Capital Management.

"The fact that the president got on the air last night" and said he would support the election results "was a big deal," Grisanti said. "And so, we don't have to have weeks of debating whether [Democratic Senate candidate James] Talarico really won Texas. That was a big deal also. The Democrat victory was so large. The saying is 'too big to rig.' There's no argument at the margins on this one."

Chaos could yet descend on the 2026 midterms. Losing candidates could refuse to concede, question the results, even claim widespread election fraud. Fresh seeds of uncertainty could tank the stock market. It has happened before.

The best way for an investor to respond to that scenario is to do nothing, said Lou Whiteman, contributing stock analyst at Motley Fool.

“Stay bullish on the country,” he said. “Stay bullish that, even if it takes a few days, things will get resolved.” 

The data doesn’t tell us why stocks do better in November in election years, but researchers have a theory: Elections bring closure. 

“Markets hate uncertainty,” Lefkovitz said. “So, getting past the election puts an end to uncertainty. It allows markets to move on.” 

The two worst election months for the stock market came in 2000 and 1948, Morningstar found.  

In 2000, uncertainty lingered for many days after a presidential election that was too close to call. The 1948 election was close enough to yield the infamous “Dewey Defeats Truman” headline, rattling markets.  

If those scenarios provide any guidance, Lefkovitz said, it’s that the stock market likes elections with clear winners. 

One big question hovering over the 2026 midterms was whether the election would yield a unified or divided federal government. Voters answered that question emphatically, delivering both the House and Senate to solid Democratic control. Two years of unified Republican government are coming to an end.

Which is better for the stock market, a divided or unified government? Morningstar examined that question as well. 

The analysis found that stocks have performed better under a unified federal government over the past century, with average past gains of 1.2% a month, compared with 0.7% a month under a divided government.  

That finding cuts against conventional Wall Street wisdom, which suggests a divided government might be better for the stock market. Here’s the surprising reason: A unified government is more likely to enact policy, and policymaking can stymie business activity. 

“Markets have actually performed better overall under unified government than divided,” Lefkovitz said, “but they’ve performed well in both.” 

Several other financial firms have weighed in with analyses of how stocks perform before, during and after federal elections. 

A report from BlackRock finds that annual stock market returns tend to be weaker in midterm years. Over the past century, stocks have risen 7.5% in midterm years and 12.4% in non-midterm years, on average, the analysis found.  

If that’s the rule, this year could prove an exception. The S&P 500 is up about 12% in 2026, as of Oct. 29. 

A report from Fidelity finds that stocks tend to do well in the 12 months after a midterm. Since 1950, the S&P has gained just 4.9% in the 12 months leading up to midterms, but 14.5% in the 12 months after, on average.  

Motley Fool reports similar findings. 

“The biggest thing we see post-election is, we go from talking about what might happen to talking about what happened,” Whiteman said. “It’s the uncertainty, or not knowing what the future holds, that tends to give traders the creeps.”