Here's a fun thing about midterm elections: the party in the White House almost always gets clobbered, and the stock market almost always seems fine with it. Billionaire investor Kenneth Fisher is out with a fresh look at the historical data, and his conclusion is basically that gridlock is good for your portfolio, even if it's bad for whichever party just got shellacked at the polls.

History Says the President's Party Loses Seats. A Lot of Them.

Start with the scoreboard. Data spanning midterm elections from 1914 to 2022 show that the president's party shed House seats in 89.3% of midterms, losing an average of 30 seats. In Senate midterms, the president's party lost seats 71.4% of the time, averaging a loss of four seats.

With Republican President Donald Trump in office, the party breakdown looks like this:

• Republican presidents averaged a loss of 28 House seats and 4 Senate seats.
• Democratic presidents averaged a loss of 32 House seats and 4 Senate seats.

Fisher summed up the pattern in a post on X: "Since 1914, the president's party shed House seats in 89% of midterms, averaging 30 lost—and 71% of Senate midterms, averaging 4 seats lost. Party doesn't matter. The 'midterm miracle' works because we simply won't believe it works. Blinded by ideology, we all always expect…"

The 'Midterm Miracle' and the 19.8% Number

So the president's party takes a beating. Why would that be bullish? Because divided government tends to mean less gets done, and Fisher argues that midterm elections create congressional gridlock, serving as "a powerful positive for global stocks." S&P 500 total return data from 1926 to 2022 shows stocks enter their "most consistently positive nine-month run" after midterm elections.

The historical performance metrics during this cycle break down like this:

• President's Second Year, Q4: 6.4% average return (84% positive rate)
• President's Third Year, Q1: 6.6% average return (88% positive rate)
• President's Third Year, Q2: 5.6% average return (88% positive rate)

Across the full post-midterm period, Fisher calculates an average total return of 19.8%, with positive returns in 92% of historical cycles. That's the "midterm miracle."

In another post, Fisher wrote: "Midterm elections typically create congressional gridlock—a powerful positive for global stocks. This may not be welcome news for whichever party runs Washington, but looking at history as a guide, stocks have had the most consistently positive nine-month run following midterms."

Ideology Is Not an Investment Strategy

Fisher's broader point is that investors let politics cloud their judgment. He emphasized that "party doesn't matter" for stock outcomes, and said investors are often "blinded by ideology," causing them to "always expect disaster and all hell to break loose" when their side loses seats.

What actually tends to happen, per Fisher, is that "subsequent legislative quiet brings positive surprise for stocks," as markets historically respond favorably to reduced legislative activity following midterm elections. In other words, the thing voters dread, a do-nothing Congress, is often exactly what the market ordered.

Where Stocks Stand Right Now

The S&P 500 index has advanced 12.57% year-to-date. Similarly, the Nasdaq Composite index was up 15.89%, and the Dow Jones gained 7.17% YTD.

On Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed lower. SPY fell 0.72% to $767.81, while QQQ fell 0.84% to $741.21. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 0.71% lower at $514.30.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by MarketDash editors.