Market Headlines Got You Nervous? What Midterm Election Years Actually Do to Stocks — and Your Retirement Income

Market Headlines Got You Nervous? Let's Look at What's Actually True

Every other year, right around this time, the financial headlines start sounding a little more dramatic. "Midterm election year volatility." "Markets brace for uncertainty." If you've seen a few of those lately and felt a flicker of worry about your retirement savings, you're not imagining things — midterm years really do tend to behave differently than other years. But "differently" doesn't mean "badly," and the full picture is more reassuring than the headlines suggest.

Why Midterm Years Make Headlines Louder Than Usual

There's a real pattern here, and it's worth naming honestly rather than ignoring it. Historically, annual U.S. stock market returns have been weaker in midterm election years — averaging around 7.5%, compared with roughly 12.4% in non-midterm years. The two most recent midterm years were rougher still: the S&P 500 returned -4.4% in 2018 and fell -18.1% in 2022, the weakest years for stocks since 2008. That history is exactly why midterm years tend to generate more anxious headlines than usual.

This Year Has Actually Been Calmer, Not Scarier

Here's what's easy to miss amid the noise: 2026 itself has broken from that historical pattern so far. U.S. stocks were up 13.1% through August — the sixth-best start to a midterm year since 1926 — with only four days of swings of 2% or more in the S&P 500 through August, compared with 46 such days in all of 2022 and 20 in 2018. In other words, the data we actually have so far this year looks nothing like the "midterm year selloff" the headlines warn about. We can't tell you what the market will do over the next few months — no one honestly can — but it's worth knowing that the year-to-date reality has been calmer than the historical average, not worse.

What History Says Happens After the Election

One more piece of historical context, for whatever it's worth: looking back across past cycles, the six months following a midterm election have averaged a 14.1% return, compared with 5.7% in the six months following non-midterm years. That's a historical pattern, not a prediction or a guarantee about what will happen this time — markets don't move on schedule just because a calendar says so. But it's a useful reminder that periods of pre-election uncertainty have historically been followed by recovery, not permanent decline.

Why Your Retirement Paycheck Shouldn't Ride on Any of This

Here's the real point, regardless of which way headlines swing between now and January: your grocery bill, your utility bill, and your mortgage or rent don't care what the S&P 500 did last Tuesday. That's the entire argument for building a retirement income plan with a guaranteed floor underneath it — income from Social Security, a pension if you have one, and often a fixed or fixed indexed annuity with an income rider — so your essential expenses are covered no matter what happens in the headlines. The money positioned for growth can stay invested for the long run, while the money covering your bills isn't exposed to a bad quarter.

Separating "Growth Money" From "Paycheck Money"

One of the more useful shifts in thinking we see clients make is separating their savings into two mental buckets: money earmarked to grow over the long run, and money earmarked to become a steady paycheck. The growth bucket can afford to ride out a bumpy year or two, because you're not planning to touch it for a while. The paycheck bucket is a different story — it needs to be dependable on a monthly basis, which is exactly why so many retirement income plans lean on sources like Social Security, pensions, and annuity income riders for that piece specifically.

A Simple Gut-Check for Your Own Plan

Ask yourself one question: if the market dropped sharply tomorrow and stayed down for a year, would your essential monthly bills still get paid without you having to sell investments at a loss? If the answer is yes, you likely already have the kind of income floor that makes headlines like these far less stressful to read. If you're not sure, that's a conversation worth having before the next round of "midterm year" headlines shows up.

Takeaway

Midterm years have a real historical tendency toward more bumpiness — and this year has, so far, been calmer than that history would suggest. Either way, the goal isn't to predict what the market will do next; it's to build a retirement income plan sturdy enough that you don't have to. If you'd like help checking whether your own plan has that kind of floor underneath it, we're happy to look at it with you.

This article is educational only and not personalized financial advice, and is not a prediction or forecast of future market performance. Source: BlackRock, "2026 Midterm Elections and Market Performance," citing historical S&P 500 returns and volatility data through August 2026. Guarantees associated with annuities are subject to the terms of the specific contract and the issuing insurance company's claims-paying ability.