Wall Street has produced plenty of statistics that deserve burial beside the efficient-market hypothesis.
This one keeps surviving.
Since 1950, the S&P 500 Index has finished higher 12 months after every midterm election.
Nineteen elections. Nineteen advances.
J.P. Morgan Asset Management calculates the average gain at roughly 15%. GW&K Investment Management studied a slightly longer period, beginning at the end of September in each midterm year and running through the following December.
Its 19 observations produced an average total return of 29.9%. Every period finished higher.
While the headlines obsess over who’s up, who’s down and which party might seize control, stocks have their own historical patterns that are worth watching. The trick is not letting the political circus distract you from the bigger picture. (Source: Covenant Wealth Strategies)
Here’s the thing: no matter if the Republicans retain control of Congress or the socialists gain the upper… either way, you need to keep one hand on yourwallet.
Nineteen observations make an interesting historical pattern. They do not repeal recessions, inflation, war, bad earnings or expensive stocks.
Nor do they account for the expensive AI stocks which are currently under attack from the capex vigilantes.
Reuters recently described a “tale of two markets.” The S&P 500 has climbed to record territory, but more than four out of every 10 constituent stocks are down this year. Fewer than half of the companies in the index recently traded above their 200-day moving averages. Sandisk (SNDK) and Micron Technology (MU) have more than tripled, while Nvidia (NVDA), Apple (AAPL), Micron and Advanced Micro Devices (AMD) have supplied a disproportionate share of the index’s advance.
Another Reuters analysis found 62% of S&P 500 constituents below their 50-day moving averages even with the index close to record highs. Analysts expect third-quarter S&P earnings to rise more than 30% from a year ago, but strip out the “Magnificent Seven,” technology and energy and the expected growth falls to about 5%.
That’s a lot of weight balanced on a few shoulders.
The AI leaders have earned some of their enthusiasm. Micron recently forecast revenue above Wall Street expectations as customers scrambled for AI memory capacity. Earlier this year, customers committed about $22 billion to secure Micron memory chips.
The question heading into the midterms is how long investors keep financing the expansion.
Reuters calculates that Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Meta Platforms (META) and Oracle (ORCL) are on course to spend more on capital expenditures than they generate in free cash flow by 2027. Consensus estimates imply roughly $534 billion of additional capex between 2025 and 2027 against about $340 billion of additional operating cash flow.
Big Tech is throwing money at AI like there’s no tomorrow. These tech behemoths are pouring billions into chips, data centers and computing power, all convinced that whoever builds the biggest AI empire gets to rule the next era of technology. (Source: Yahoo! Finance)
Those companies can afford an expensive race longer than most companies on Earth. They still have to earn a return on the money.
And that’s the distinction the capex numbers can obscure. Spending money on productive assets is not the same thing as creating productive capital. Servers depreciate. Chips become obsolete. Data centers consume enormous amounts of power. Some portion of today’s investment will have to be replaced simply to remain technologically competitive.
The real test is what remains after depreciation and what the remaining capital earns. A technology can be revolutionary and still attract more investment than its eventual profits can justify.
That’s where the 19-for-19 midterm record becomes useful. The historical tailwind arrives while investors are deciding whether today’s AI leaders can turn extraordinary spending into extraordinary profits.
A broad post-midterm rally would give them time. A broad rally accompanied by continued AI spending could give selected companies much more than 15%.
The index gives us the tide. We still have to choose the boats.
~ Addison
P.S. One of two things is going to happen on Tuesday, November 3, 2026.
Republicans will retain control of Congress and the Trump mandate will kick into high gear for the remaining two years of his second term.
Or, the data proves out, and socialists move into positions to stall tax reform, impeach administration officials they don’t like and let TDS run wild through the mainstream press all over again.
Either way, it’s up to you to keep your own eyes on your money, right?
Take a look at this:
That’s a photo we just took of the actual patent for our AI-driven forecasting tool. It’s remarkably accurate. The AI tool sifts through millions of transactions in the open market simultaneously and gives us strong forward guidance on any stock we choose to run through the system.
It’s fantastic. And gives us insight into both larger-than-life macro trends and granular price movements in individual stocks.
Why does the patent matter?
Well, the good news is you don’t have to forecast political winners or agree with the flaccid promises candidates make to get elected to find potential winners on Wall Street.
The patented tool also helped us assemble the exact historical patterns that will help you make and preserve your money before, during and after the midterm elections and the investment opportunities that will naturally flow from a political shift in Washington. Click here to see how you could put them to work in your portfolio.
