by Gary Alexander
June 30, 2026
As we reach the mid-point of the year, we need to face the unpleasant history of mid-term election years as the worst year of the four – by far – in the four-year cycle. In my early investing life, I lived through 10 of 11 major market collapses in the mid-term years between 1962 (the Cuban Missile crisis and U.S. Steel wars) and 2002 (the dot-com/NASDAQ collapse). The next three mid-term years (2006, 2010 and 2014) were thankfully peaceful, but then we saw a big market retreat in late 2018 (over the aggressive monetary policies of new Fed Chair Powell) and then over the Fed’s (and President Biden’s) 2022 inflation denials.
Here’s the good news – a spoiler alert, in reverse: The flip side of such a dismal historical track record is the 6-12 months following each mid-term election – netting the strongest market surge of the four-year cycle, by far – partly due to the inevitable hope (“this time is different”) a new Congressional mix will somehow solve all our problems, since all we need is to create more checks and balances in Washington.
So, the one takeaway, I want everyone to recall from the following track record is the 12-months after a mid-term election never posted a negative return since 1950 – and the average gain was +16.3%.
First off, let’s review the bidding: Most mid-term years are flat in the first half, down in the third quarter, then soaring in the final quarter, as reviewed in mid-term years over nearly 100-years:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
It’s important to know your history, too. Most mid-term downers were caused by external events more than the market’s internal health. To demonstrate that, let’s review the 10 (of 11) downers since 1962:
1962 featured two external crises: the real one, in October, was the Cuban Missile Crisis, but the earlier crisis is when the market tanked, during a spring war between President Kennedy and U.S. Steel. The Dow fell 27% from December 13, 1961, to June 26, 1962, but then it gained 85.7% by February 9, 1966.
1966 delivered a short recession disguised as a “credit crunch,” running from February to October, delivering a 25.2% haircut in eight months, followed by a major market recovery in 1967 and 1968.
1970 brought a tech-stock crash similar to the dot-com bubble of 2000, as the Nifty 50 and an array of computer and software stocks fell up to 80% in the second quarter of 1970. Then came a 50% rebound.
1974 capped the worst long-term market collapse (in real, after inflation terms) in the postwar era. The primary cause was the OPEC oil embargo of late 1973, tripling gasoline prices, but we also had major drains coming from the endgame in Vietnam and the Watergate crisis, with President Nixon’s resignation. Then came Ford’s attempt at healing us, and the best single market year since the 1950s, +38% in 1975.
1978 brought a second oil shock, exacerbated by Carter’s new Department of Energy, resulting in long gas lines and sky-high prices, yielding a sense of malaise and Carter’s loss to Reagan in a “misery index” peak year (1980) of 20% interest rates, 12% inflation and 11% jobless rates – but a 15% market surge!
1982 delivered the second of a “double-dip” recessionary blow at the start of Reagan’s first term, in the steep (but mercifully short) inflationary recession of 1982, ending suddenly, with 15-fold gains, 1982-99.
In summary form, here are those sad mid-term markets and the strong recoveries following these dips:
Whew! Time to take a break from this bad news to recall the bull-market of 1982-99, and why the next mid-term election year (1986) broke the cycle. First of all, the 1984 stock market had no business falling by 3.7%, since 1984 was the biggest, strongest GDP growth year (+6.9%) we’ve seen since 1950. And that’s the year President Reagan won the election by a landslide, with a slogan, “Morning in America.”
Then came a counter-cyclical +22.6% market gain in the mid-term election year of 1986, largely tied to the most dramatic tax reform package ever passed, lowering top tax rates to 28%, delivering a “morning” to America. As a result, the market soared too far too fast in 1987, resulting in a major crash in October.
Now, let’s return to our regularly scheduled program, reciting mid-term election year market collapses.
In brief, the 1990 decline followed the August invasion of Kuwait by Saddam Hussein, the 1994 decline followed a sudden surprise rate-rising regimen by Greenspan’s Fed in a fight against phantom inflation. The 1998 decline stemmed from the failure of the Long-Term Capital Management (LTCM) hedge fund and 2002’s decline was the final dismal market spasm of the dot-com bubble (and post-9/11 fears).
The next two mid-terms involved massive election reversals by voters disgruntled with (1) Bush’s wars (in 2006) and (2) Obama’s health-care plans (in 2010): Then, 2014 passed without major incidents, but now we’ve seen two major (19%+) market reversals in the last two mid-term election years, namely:
In 2018, new Fed Chair Jerome Powell raised interest rates one time too many, perhaps in defiance of President Trump’s multiple Tweets not to hazard such a destructive move. The President was right, but wrong in his meddling ways, as the market tanked in December 2018. The Dow Industrial Average fell by nearly 20% from its early October 2018 peak, delivering its worst December performance since 1931.
In 2022, the Fed’s delay in raising rates to fight what they called “transient” inflation increases in 2021 led to a 21% decline in the Dow over the first nine months of 2022 before recovering strongly since then.
In all instances above, I’ve used the Dow Jones Industrial metrics, since it is the longest-running market measure, but the same trend is even more evident in the S&P 500 (computed actively since 1950) and NASDAQ (since 1971). Here’s a summary of the S&P downdrafts and subsequent recoveries since 1950.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
These numbers differ from my data above since this table covers the S&P 500, not the Dow, and covers mid-term years alone, not from its previous peak level, and the recovery covers a 12-month period only.
One of the major causes for the big recoveries following mid-term elections is the “restraining orders” put on one-party power monopolies in these mid-term elections. The last four incumbent presidents suffered massive reversals of their seats in Congress in 1994 (Clinton), 2006 (Bush), 2010 (Obama) and 2018 (Trump), and it could happen again in 2026. Voters like to think they have some veto powers.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
We don’t yet know if President Trump will receive a second mid-term spanking in November 2026, but American voters have this “get out of electoral jail free” card every mid-term. The market likes that, too.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Enjoy the second half of 2026: Ignore any big draw-downs by remembering those fourth-quarter surges!
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
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About The Author
Gary Alexander
SENIOR EDITOR
Gary Alexander has been Senior Writer at Navellier since 2009. He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks. For the previous 20-years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.
Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s. He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division. Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander
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