The United States Midterms and Markets

Summary

The presenter reviews historical U.S. stock-market performance under different combinations of presidential party and congressional control ahead of the midterm elections. He emphasizes that the charts show historical averages, not forecasts. Election outcomes and polls are uncertain, the datasets are limited, and market behavior can vary widely.

Historical returns by political regime

Since 1953, the charts show differing results across political configurations:

• In one comparison, a Democratic president with a fully Republican-controlled Congress had the strongest average or median annual returns, with a median near 20%.
• Unified Republican control was also positive in one chart, with an average annual return of 13.3% and a median of 13.6%.
• A Republican president with a fully Democratic Congress was the weakest configuration in that comparison, with an average annual return of 4.9% and a median of 4%.
• Another chart gives different figures for full control: average returns of 9.8% under unified Republican control and 9% under unified Democratic control, with medians of 11.3% and 12.4%, respectively.

The presenter notes that the figures vary across the charts and samples presented, but that full control by either party has generally not been unfavorable to markets.

For forward returns under a Republican president with a fully Democratic Congress, the presenter cites averages of 0.9% over three months, 1.8% over six months, and 4% over 12 months. He contrasts these with 15.2% for a Democratic president with a divided Congress and 9% for a Republican electoral victory.

Extending the data back to 1928 changes some comparisons, partly because Great Depression-era returns affect the results. The presenter cautions that very old party comparisons are not directly comparable because party platforms and composition have changed over time. He also stresses that weaker historical averages do not mean markets necessarily fall; some of the averages remain positive.

Market risk and performance measures

The return distributions include severe down years under different political configurations, such as approximately −47% in 1931, −39% in 1937, −38.5% in 2008, −29.7% in 1974, −28% in 1930, and −23% in 2002. The presenter’s point is that poor market performance has occurred under multiple party configurations.

He notes that the historical samples are limited and have large standard deviations, making averages less definitive. Sharpe-ratio distributions appear to include more extreme outcomes under Republican administrations, while results during Democratic administrations cluster more tightly; the presenter does not characterize this as a clear causal trend.

By presidential term, the cited Sharpe-ratio rankings include Lyndon B. Johnson at 1.96, the highest, and Richard Nixon’s second term at −1.6. Nixon’s second-term Sortino ratio is given as −2.15.

Comparisons across presidential terms and assets

S&P 500

On a normalized comparison of presidential terms, the presenter says the market’s return at the discussed point in Donald Trump’s second term was about 26%, compared with about 20% at a comparable point in Trump’s first term. He describes the levels as broadly similar and compares a Q1 2026 correction with the Q1 2018 correction. He also notes the early-2025 decline associated with tariffs.

He says the S&P 500 had held up better at the comparable point in Trump’s second term than during Biden’s term, when the market was in a bear market. These are comparisons of charted periods, not forecasts.

Bitcoin

The presenter says Bitcoin’s performance during Trump’s second term and Biden’s term looked broadly similar, while Bitcoin performed substantially better during Trump’s first term and Barack Obama’s second term. He attributes weaker returns in more recent cycles partly to post-2020/2021 macroeconomic pressures, including inflation and labor-market turmoil.

He adds that, if Bitcoin followed the pattern seen during Biden’s term, a renewed advance in 2027 could be consistent with that historical comparison. This is a conditional historical analogy, not a prediction.

Midterm patterns and uncertainty

In the presenter’s historical chart, markets under a Republican president and Republican Congress tended to decline before the midterms, recover somewhat, and then weaken again. Under a Republican president with a divided Congress, the chart shows a significant decline and less bullish performance six to nine months later than under unified control.

The presenter declines to predict the election result, noting that polling has sometimes been accurate and sometimes badly wrong. Results may also take time to confirm, and markets generally prefer certainty to prolonged uncertainty.

Methodology and cautions

The analysis compares historical S&P 500 returns across combinations of presidential party and House and Senate control. It examines average and median annual returns, forward returns over multiple horizons, return distributions, volatility, Sharpe and Sortino ratios, and performance across presidential terms.

The presenter advises treating the results as descriptive rather than predictive. He highlights the small samples, large variation, changing party composition over time, and the influence of exceptional periods such as the Great Depression and the pandemic.

Assets and instruments mentioned

• S&P 500
• Bitcoin
• U.S. equities and the stock market broadly

Disclosure

The channel’s accompanying disclaimer says the information is not financial advice. The presenter also repeatedly describes the analysis as historical data rather than a prediction.

Presenter/source: Benjamin Cowen. The presenter discusses historical charts and data, but no specific underlying data source is identified in the subtitles.