History Favors a Post-U.S. Midterm Election Rally

Funds in focus: Brompton Enhanced Multi-Asset Income ETF

With the U.S. midterm elections approaching on November 3, 2026, investors are increasingly focused on the potential implications for equity markets. Historically, midterm election years have been characterized by weaker equity market performance and heightened volatility relative to non-midterm years. This pattern is particularly evident when examining the four-year U.S. presidential cycle, where the second year has delivered the lowest average returns. Between 1945 and 2025, the S&P 500 generated an average gain of just 3.8% during midterm election years, significantly below the 10.9% average recorded across the remaining three years of the presidential cycle.¹ Midterm election years are shown to have the largest average drawdowns with 18%, versus an average drawdown of 12.4% for the other three years in the cycle.¹

Several factors may contribute to this historical pattern. Political uncertainty surrounding potential changes in congressional control, fiscal policy, taxation and regulation can weigh on investor confidence. At the same time, midterm elections often coincide with a period when the administration’s initial policy initiatives are being reassessed, creating additional uncertainty around the economic outlook.

S&P 500 average price returns during the presidential cycle since 1945

Despite the relatively weak performance leading into midterm elections, historical market returns following the vote have been considerably stronger. Since 1950, the S&P 500 has generated positive returns in the 12 months following every midterm election, with an average gain of approximately 15%.¹ This historical resilience suggests that the removal of political uncertainty can provide a favourable backdrop for equities, allowing investors to refocus on corporate fundamentals, earnings growth and monetary policy. Importantly, the historical post-election recovery has occurred under both Democratic and Republican administrations, suggesting that the resolution of uncertainty may be more influential than the election outcome itself.

The upcoming midterm elections take place against a backdrop of elevated equity valuations, solid market performance (S&P 500 up 14% YTD²), significant investment in artificial intelligence infrastructure and ongoing uncertainty surrounding trade policy, inflation and interest rates. While historical patterns suggest that election-related volatility could create attractive entry points, the magnitude and sustainability of any post-election rally will ultimately depend on the underlying economic and earnings environment.

Brompton’s Approach

We believe maintaining a disciplined investment approach focused on fundamentals remains more important than attempting to predict political outcomes. We see periods of politically driven market weakness as providing opportunities to selectively increase exposure to high-quality companies with durable earnings growth, strong balance sheets and attractive long-term fundamentals. Against this backdrop, a diversified blend of global equities and fixed income offers investors a way to maintain equity exposure for a potential post-election recovery while diversifying across asset classes amid ongoing uncertainty.

Brompton Enhanced Multi-Asset Income ETF (BMAX) offers a unique multi-asset approach which combines global equities and fixed income securities (including non-traditional preferred share investments) into a diversified portfolio solution. By combining a variety of investment strategies, diversified by geography, sector and asset class into a single exchange-traded fund, BMAX provides investors with an efficient way to access a portfolio built for various market conditions.