Its Sharpest Declines — Followed by Its Strongest Recoveries

US midterm election years have historically been among the most volatile periods for the S&P 500 within the four-year presidential cycle.

Historical data shows that during midterm years, the S&P 500 has experienced an average 17.5% decline from a local peak to the subsequent low — the largest average drawdown of any year in the presidential cycle.

But what happens after the market reaches its bottom is even more interesting.

Following these lows, US equities have historically staged particularly strong recoveries. Over the subsequent 12 months, the S&P 500 gained an average of 31.7%, representing the strongest performance within the presidential cycle.

And 2026 is a US midterm election year.

The main election will take place on November 3, 2026, when Americans will vote for all seats in the House of Representatives and roughly one-third of the Senate.

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History is, of course, no guarantee that the same scenario will repeat in 2026. However, it highlights an important point: a significant market decline does not necessarily mean the end of a broader growth cycle. On the contrary, it can create attractive opportunities for the period that follows.

From our perspective, the key question will not simply be whether the S&P 500 falls by 10%, 15%, or 20%, but how quickly investor sentiment changes, how expectations for interest rates develop, how US companies perform, and how the political environment evolves ahead of the November elections.

If history repeats even partially, the most interesting part of 2026 may not come before a potential market correction — but after it.

XDIGR.cz — we follow the markets in both directions.