Every midterm election since 1946 has meant one thing for stocks

So far, markets are ignoring the uncertainty of the midterm elections and the potential outcomes for the remaining years of the Trump presidency.

There are probably two reasons for this.

First, markets have consistently performed very well in the years following midterm elections.

Every year of midterm elections since 1946 has been followed by positive one-year stock returns, noted Truist chief strategist Keith Lerner (see chart below). The largest gain after a midterm election year came in 1954, at 34 percent.

The average gain over one year is 14.4%.

“With the S&P 500 index roughly flat since June, the market has loosely followed the historically volatile pattern of the midterm elections,” Lerner added. “The seasonal backdrop becomes more constructive as we move into the fourth quarter. Since 1950, the S&P 500 has gained an average of 6.6% during the fourth quarter of midterm election years and has advanced 84% of the time.”

Second, this midterm election season comes as U.S. businesses are posting record profits.

The S&P 500 (^GSPC) is expected to report year-over-year earnings growth of 29.5% for the recently completed third quarter.

If true, it will mark the third consecutive quarter of earnings growth above 25%, according to FactSet. This would also represent the eighth consecutive quarter of double-digit profit growth.

For the fourth quarter, Wall Street analysts expect profit growth of 27.6%.

Analysts forecast year-over-year earnings growth of 32.4% for 2026 when all is said and done.

Certainly, a lot has been launched into the market over the past month as the midterm elections approach. The rise in oil and gas prices is weighing on consumer confidence. Rising global bond yields are increasing the cost of capital for consumers and businesses.

But there are plenty of positive scenarios for stocks after the midterms, Wall Street pros believe.

“For U.S. stocks, we believe seasonality should turn favorable starting in October, with uncertainty giving way to a near-term decline if Democrats outperform,” Morgan Stanley’s strategy team said in a note. “Which type of majority matters more than which party wins from a stock market perspective: we believe a ‘cohesive’ Democratic majority can use much-needed legislation as leverage to delay OBBBA-related cuts, with implications for consumer and health care stocks. As for rates, only deficits larger than investors anticipate should move the curve, a downside risk to growth.”