The S&P 500 historically drops by an average of 18% during midterm election years before November. However, the market tends to rebound post-election, with an average 14% return in the following six months. Wall Street predicts the S&P 500 could hit 8,085 by January 2027, a 16% increase from its current level.

Midterm election years have historically been volatile for the S&P 500 due to political uncertainty. While the index typically sees a 1% return during these years, it can drop by an average of 7% when a new president takes office. This year, the index may experience an 18% drawdown at some point.

After elections, policy uncertainty diminishes, leading to a strong market performance. The six months following midterms have historically shown a 14% increase in the S&P 500. Attempting to time the market is risky, as corrections can impact returns more than market timing. Analysts expect 2026 to be a positive midterm election year.

Wall Street analysts forecast a 16% upside for the S&P 500, projecting it to reach 8,085 in the next year. However, historical data shows analysts have been off by an average of 14 percentage points in their predictions. Investors should exercise caution amid potential policy changes post-election.

Stock Advisor analysts recommend caution in the current market environment due to potential volatility in midterm election years. Investors should focus on high-conviction stocks and be prepared for drawdowns. Building a cash position and buying opportunities during market dips may be wise strategies. Stock Advisor has outperformed the S&P 500 by 759%.

Read more at Yahoo Finance: The Stock Market Usually Falls Hard in Midterm Election Years. Wall Street Says This Will Happen in 2026.