September Market Update: The Economy and Interest Rates Should Drive Investment Decisions More Than the Midterm Election
September Market Update: The Economy and Interest Rates Should Drive Investment Decisions More Than the Midterm Election
Wyatt Lewis | Financial Advisor
September 1, 2026
With the November midterm election drawing closer, political campaigns are ramping up across the country. Politics have become increasingly divisive, and it is natural for investors to wonder whether the election should affect their financial decisions. Now more than ever, it is important to keep political views separate from investing and avoid making changes to financial plans based on election outcomes.1
Midterm elections happen every four years, halfway through a presidential term, and determine who controls Congress. While polls suggest a divided government is the most likely outcome, margins are narrow in both chambers.2 Republicans currently hold 219 seats in the House, where 218 are needed for a majority, meaning Democrats could take control by winning just a few races. In the Senate, Republicans hold 53 seats, though prediction markets have been shifting.3
Elections matter deeply for society, shaping policies on issues like entitlement programs, taxes, and the federal debt. Even so, history shows that Washington politics have far less impact on long-term investment returns than many people expect.
Midterm election years have tended to produce positive market returns
Many investors assume that election years bring extra uncertainty and that it might be safer to step back from the market. However, the data tells a different story. Looking back to the Great Depression, stock market returns have been positive on average across election years, midterm years, and non-election years alike. Markets have performed well under Republican, Democratic, and divided governments.4
Of course, not every year produces gains. Recent midterm years offer a good example: 2022 saw high inflation following the pandemic, and 2018 brought concerns about global growth and interest rate policy. In both cases, negative returns were driven by those underlying economic conditions, not by the fact that it happened to be a midterm election year.
The economy and interest rates are bigger drivers of portfolios than elections
For long-term investors, broader economic forces such as the business cycle and interest rates have historically mattered far more than which party controls Congress or the White House. The chart above shows the current period of elevated interest rates, which affects markets, businesses, and everyday consumers. While policymakers can influence rates, they are ultimately shaped by longer-term economic trends.
Political change also tends to happen gradually and with delays. Even significant policy shifts, such as changes to taxes and tariffs in recent years, often do not have as large or as immediate an impact as many expect. Economic growth, corporate earnings, inflation, and employment are all shaped by a wide range of factors that go well beyond any single election.
Markets have grown steadily across both political parties over time
Perhaps the most important takeaway for long-term investors is that markets have grown across many different political cycles. The chart above shows that the S&P 500 has risen over the past century, through political changes, wars, recessions, and major policy shifts.5 This long-term growth reflects the resilience of the economy and the compounding power of staying invested.
This does not mean that policy is unimportant. The outcome of this year's election could shape the legislative agenda on issues such as the Iran conflict, tax provisions, tariffs, and the national debt. These are real concerns for many investors. However, the key is to focus on what can be controlled. Holding a well-diversified portfolio built to perform across a range of economic and political environments is more effective than trying to predict any single election result.
The bottom line?
Midterm elections are important for the country, but it's important to separate politics from investing. History shows that, even during election years, staying disciplined and focused on fundamentals is the best way to pursue financial goals.
References
1. https://www.usa.gov/midterm-elections
2. https://www.realclearpolling.com/latest-polls/2026
3. https://polymarket.com/event/balance-of-power-2026-midterms
4. Clearnomics research and Standard & Poor's data, as of August 7, 2026
5. Clearnomics research and Standard & Poor's data, as of August 7, 2026
Index Descriptions
S&P 500
The Standard & Poor's 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The modern design of the S&P 500 stock index was first launched in 1957. Performance prior to 1957 incorporates the performance of the predecessor index, the S&P 90.
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References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
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