Three Months After the Midterm Elections, Where Should Money Go?

Zen Unmeasured · Based on Zen Certainty

The U.S. midterm elections are on November 3, 2026.

Every year around this time, the same narrative emerges in the market: the stock market must rise after the midterm elections, with an average increase of double digits in the year following the elections, making it a golden window for positioning.

This narrative is supported by data, not fabricated. But it speaks to twelve months. What most people truly care about is the two to three months after the elections—where exactly should the money go?

The answers to these two questions differ greatly.

1. First, Let’s Break Down “The Market Must Rise After Elections”

The most common statement in the market is: since 1950, all 19 midterm elections in America have led to increases in the S&P 500 over the subsequent twelve months, with an average increase of about 15.4%.

This number is real. However, using it to guide the next three months would be a typical mistake.

Let’s look at more detailed statistics.

From 1990 to 2022, after the midterm elections:

There is something striking in this table: the biggest increase occurs before the election, not after it.

+4.7% in the three months before the election versus +2.3% in the three months after—the latter is less than half of the former.

Some researchers have reviewed this pattern and expressed it more directly: the rise doesn’t start after the election; it starts before the election. Historically, the stock market hits bottom about 33 days before the election and begins to rebound around the end of September.

In other words, most of the market movement for the midterm elections has already happened before the election.

So, what is left in the three months after the election? What remains is the tail end of that movement and a pile of things that need to be digested.

2. What Happens in Those Three Months After the Election?

To understand why the average increase is only +2.3% in the three months after the election, one must first accept a fact: the election itself does not create value.

It merely settles a lingering issue.

Before the election, the market fears uncertainty—who controls Congress, which direction policies will take, whether there is any room for fiscal spending. The existence of this uncertainty inherently suppresses valuation.

Once the election is over, this pressure is relieved. Therefore, there is often a recovery afterward. However, the magnitude of the recovery depends on how strong the fundamentals already are, and the election merely reveals these fundamentals.

This explains why the increase is limited in the three months after the election: the necessary increases have already occurred before the election.

Puyin International has reviewed twelve midterm elections since 1978, and their cautious conclusion is: the short-term impact of midterm elections on major asset classes is limited; most assets fluctuate post-election, with signals of certainty often gradually emerging only three months after the election.

Note the weight of this sentence. "Fluctuations in the week after the election"—in other words, if you want to make a judgment on the day the election results are announced, what you will see is noise.

And "gradually emerging three months after the election" is precisely the window you are looking for. The nature of this window is not "rising window," but "divergence window."

3. In the Three Months After the Election, Three Types of Assets Differ Greatly

This is the most substantive part of this article. Even within these three months, the performance logic for U.S. stocks, gold, and Bitcoin is completely different, and cannot be generalized.

U.S. Stocks: Recovery, but Limited in Extent

Based on Puyin International’s various scenario backtesting from twelve samples, looking at absolute returns in the three months after the election:

• Divided Congress: Commodities > U.S. Stocks > U.S. Bonds > Dollar

• Unified Government: Commodities > U.S. Stocks > U.S. Bonds > Dollar

• Opposition Controls Both Houses: U.S. Stocks > U.S. Bonds > Dollar > Commodities

And for the baseline scenario of 2026, it is generally believed to be divided Congress—from the current electoral situation, this possibility indeed seems high.

In the scenario of a divided Congress, the historical ranking is commodities first, U.S. stocks second. However, the institution adjusted its current predictions: Bonds > Precious Metals > U.S. Stocks > Dollar.

Why push U.S. stocks back? There are two reasons, both straightforward:

First is valuation. Current U.S. stock valuations are significantly higher than they were during the midterm election in 2018, and long-term bond rates are also high, which limits the space for post-election recovery.

Second is financial environment. After the 2018 election, the Federal Reserve had much greater leeway in policy shifts than now. The current financial environment is relatively tight, with fewer available options.

Therefore, a reasonable expectation for U.S. stocks is "recovery," not "sharp rise." The historical average of +2.3% in this context, given the high valuations, may yield even less.

One more detail is worth noting: after the 2018 midterm elections, U.S. stocks experienced significant volatility, while U.S. bonds and gold showcased safe-haven effects. This suggests that even in "the three months after the election," the path for U.S. stocks that year was tumultuous.

Gold: The True Beneficiary

Gold occupies a different position in this logic compared to U.S. stocks.

A key conclusion from Puyin International's review of the twelve midterm elections is: gold's safe-haven attributes gradually emerge after the election.

Pay attention to the word "gradually." It does not spike on election day; it manifests slowly during the three-month window after the election.

The mechanism is not hard to understand:

What does a divided Congress mean? It means that policies like Trump's tax cuts and fiscal expansion will struggle to advance. Expectations for fiscal spending drop, and the expansion of deficits slows, which suppresses the dollar.

As the dollar weakens, gold directly benefits. At the same time, the uncertainty brought by the election has not fully dissipated, bolstering safe-haven demand.

Thus, gold's position in the three months after the election is quite unique—it does not rely on the premise of a "strong economy." When the economy is strong, it moves with inflation expectations; when the economy is weak, it follows safe-haven demands. The political landscape of a divided Congress can support it from both ends.

One critical counterpoint needs to be clarified: this logic only holds if there is "divided Congress + weakening dollar." If the election results are unexpected or the dollar strengthens for other reasons, this logic for gold breaks down. Not all gold rises after elections; rather, this particular scenario is favorable for it.

Bitcoin: The Most Dangerous Window

This section should be addressed separately because its data is the least friendly.

Bitcoin's returns in the first month after the midterm elections have four historical samples:

Out of the four instances, there were two sharp increases and two steep declines. There is no stable direction.

However, looking at twelve months reveals a completely different story: in 2014 +24.5%, in 2018 +44.9%, in 2022 +92.3%. All three instances were positive.

A 47% drop in the month after the election, yet a 45% rise in the year after—that is what actually happened in 2018.

These two tables together illustrate one thing: the "benefit" of midterm elections for cryptocurrencies should be viewed on an annual basis; when viewed monthly, you see only noise and deep pits.

However, there is an important distinction to be made which I believe needs to be clarified the most.

Was that 47% drop in 2018 really due to the election? That year, there was a controversy surrounding the hard fork of Bitcoin Cash (BCH), and BTC prices dropped below $5,000. The 18% drop in 2022 occurred three days after the election on November 11, when FTX filed for bankruptcy protection.

Both of these significant drops had their own independent causes; the election merely coincided with them.

This coincidence is exactly what needs to be cautioned against—because for the average trader, you cannot distinguish whether "this is a drop due to the election" or "this drop is due to something else." And the market will not distinguish these for you in times of panic.

4. What Should Ordinary Traders Do in This Window?

The previous sections provided data. This section is about actions, simply put: what you should do and what you should not do in these three months.

The First Thing: Don’t Treat “The Market Must Rise After Elections” as a Reason for Positioning

This is the most crucial point.

All twelve months up and an average of +15.4%—this statistic is true, but it has a fatal use error: it is a post-fact statistic, not a pre-signal.

You currently stand before the election. If you increase your positioning now based on "historically, the market has risen in the year after the election," you are actually assuming a position that has already increased by 4.7% beforehand, while the returns you are waiting for will materialize in twelve months.

Timing mismatch is one of the most common sources of losses for retail investors.

The Second Thing: Treat the Three Months After the Election as a “Divergence Window,” Not an “Up Window”

What the three months post-election truly provide is which assets are mispriced, not "what should be bought."

Specifically for this time: if the election results are indeed a divided Congress, then by historical patterns, the relative performance of commodities and precious metals will be stronger than U.S. stocks. This is a verifiable, testable judgment—you can observe without having to bet.

If you must participate, it should be in the realm of relative strength, not absolute direction.

The Third Thing: Prepare Bitcoin Positions As If "It Could Be 2018"

This is straightforward but very important.

Historically, in the month after the election, Bitcoin has experienced two instances of double-digit declines. Moreover, in both instances, the reasons for the drops were not the elections themselves—they were due to other events that coincided at that time.

You cannot predict whether there will be another event this time. You can only control one thing: whether your position can withstand the drop if another event occurs.

If you currently hold Bitcoin using leverage, hoping for a surge post-election—this bet’s odds based on historical data are not good. Out of the four samples, two experienced significant declines, and these samples themselves aren't small enough to ignore.

The Fourth Thing: Gold’s Logic is Clearest, But Don’t Buy Based on Expectations

Gold is the asset with the clearest logic of the three: a divided Congress suppresses fiscal expansion, the dollar weakens, and safe-haven demand provides support, pointing in the same direction.

However, "clear logic" does not mean "buying now is correct." It should be noted: this judgment hinges on the assumption that the election result is a divided Congress.

If a unified government is the outcome, then the logic of suppressing fiscal expansion does not hold, and the support for gold during this period will significantly weaken.

Therefore, the order should be: first observe the election results, then decide on the gold position, not the other way around.

The Fifth Thing: Allow Enough Time, Don’t Use Short-Term Money for Long-Term Judgments

All the preceding data points to the same conclusion: the impact of the midterm elections on risk assets is best measured annually; measuring it monthly will only reveal noise.

If you have money that you need to use within three months, it should not be exposed in this gamble.

5. Three Key Time Points to Watch

Instead of price points, let’s provide time points.

The first, the FOMC meeting on October 27 to 28.

This meeting occurs before the election. The impact of the interest rate decision may be more immediate than the election itself—especially for gold and Bitcoin. The election is a political event, while interest rates relate to the cost of capital, which influences prices more quickly.

The second, the first week after the election results are announced on November 3.

This week is likely to be characterized by repeated fluctuations. Historical experience shows that "the week after the election shows mixed results," so there is no need to rush to interpret a direction during this week.

The third, one month after the election.

This is historically the most volatile window for Bitcoin and also when gold's logic begins to take effect. If you want to observe how an asset truly reacts under this political framework, this time point carries more information than election day itself.

6. In Conclusion

To compress the entire matter into a few sentences:

The midterm elections indeed have patterns, but the relevant window is before the election, not after it. +4.7% in the three months before the election, +2.3% in the three months after—the bulk of the action occurs before the election.

The three months after the election are a divergence window, not an up window. U.S. stocks will experience recovery but with limited extent, gold's safe-haven attributes will gradually emerge, while Bitcoin is the most dangerous in that initial month.

Bitcoin's historical data illustrates the issue best: it may drop 47% in the first month after the election and rise 45% in the year thereafter. The interpretation of the same period depends on the scale you use to view it.

As for what ordinary traders should do—what truly needs to be answered is not "what should be bought," but rather "how long do I intend to hold this money."

If you misjudge the time scale, even a right direction can lead to losses.

Disclaimer

This article is a compilation of public information and market analysis, not constituting any investment advice, offer, or invitation to offer; the author does not promise any returns. Any institutions, assets, and historical statistics mentioned in the article do not constitute recommendations.

All historical data is sourced from third-party research and media reports; historical performance does not guarantee future trends. The statistics concerning post-midterm election performance typically involve small sample sizes—the S&P 500's segmented data spans over thirty years, while Bitcoin only has four midterm election samples, lacking sufficient statistical reliability. The scenario backtesting and rankings are results of third-party model projections, not facts.

Cryptocurrency is highly volatile and may result in the loss of the entire principal. The Bitcoin drop of nearly 47% mentioned in this article has genuinely occurred and may happen again in the future.

The content addressing overseas markets, trading platforms, and related assets may involve legal, foreign exchange, and tax compliance issues for residents of mainland China; please confirm and assume the corresponding risks independently.

Specific risk warnings for this piece: the core premise of this judgment is "divided Congress"; if the election results deviate from this expectation, most of the inferences made herein will simultaneously become invalid. Pricing related to political events usually occurs before results are announced, meaning there could be "good news priced in" after the election; small sample sizes indicate that historical patterns may only be coincidental, particularly concerning the four Bitcoin samples; significant drops after Bitcoin elections have historically been accompanied by independent major events, and such events are unpredictable.

Readers should independently assess and assume all consequences of their decisions.

Zen Unmeasured · Based on Zen Certainty

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