Historical Data Suggests 2027 Will Be the Strongest Market Year of Trump's Second Term

Key points

• The year after a midterm election (year three of the presidential cycle) has historically been the strongest for the S&P 500, averaging a 17.2% gain since 1950.
• The 12 months following a midterm election have produced positive returns in all 19 cases since 1950, with an average gain of 15.1%.
• The S&P 500 is up 12.83% year-to-date as of October 27, 2026, with two months remaining in the current year.
• The 10-year Treasury yield stood at 5.00% on October 23, and consumer sentiment fell to 48.1 in September, indicating a tougher background than average.
• Morgan Stanley strategists noted that the type of majority matters more than which party wins from an equity market perspective.

Background

This analysis follows earlier coverage of Trump's second term, which has been marked by a crisis of authority, rising inflation, and a contentious Iran conflict. Polls in October 2026 showed Trump's approval rating at historic lows, with voters expressing deep dissatisfaction with his handling of the economy. The current market environment is characterized by elevated valuations and interest rate pressures, but historical data suggests that long-term strategies can still achieve positive returns despite these challenges.

How outlets are covering it

24/7 Wall St. emphasizes the historical pattern of strong market performance in the year following a midterm election, citing data from Opening Bell Daily and Truist Financial. They note that while the current market conditions are tougher than average, the historical pattern suggests 2027 will be the best market year of Trump's second term. Yahoo Finance, on the other hand, focuses on the short-term window around the midterm election, noting that the S&P 500 has risen in 18 of 19 midterm years from five sessions before Election Day to three sessions after. They also highlight the importance of the 12 months following October 31 of a midterm year, which has never fallen. Jim Paulsen, however, expresses skepticism, pointing to tighter conditions over the summer, including higher oil prices and bond yields, suggesting that the upcoming buying season may not follow historical patterns.

Why it matters

Understanding the historical patterns of market performance in relation to midterm elections can help investors make informed decisions. While the current market conditions present challenges, the historical data suggests that the 12 months following a midterm vote have consistently yielded positive returns. This information can help investors navigate the upcoming election and plan their portfolios accordingly. Additionally, the type of majority in Congress may have a greater impact on the equity market than the party that wins, according to Morgan Stanley strategists.

What to watch

Investors should keep an eye on the November 3 results, the size and shape of any new majority, and whether the 10-year yield holds near 5%. The coming weeks will also see a Fed decision, results from Microsoft and Alphabet, and the October jobs report. While the historical pattern suggests a strong 2027, the current market conditions may present challenges that could disrupt this trend. Investors should maintain a long-term plan that can absorb a rough patch around the vote.