Monday, January 26, 2026
Markets are supposed to keep you on your toes and not follow consistent cycles. But the truth is markets do work in cycles, and there is a powerful one in place right now. It tells us 2026 could be a rocky year, but that the bull market may still ride on, setting the stage for fireworks in 2027.
The cycle I’m talking about is the presidential election cycle.
It often tells us whether markets will rally or slow down, especially if you look September to September. Typically, midterm election years in this view tend to suffer relative to the other three years in a presidential term.
Year one is generally good for the market because election uncertainty is gone. In year two comes the worst performance.
Stocks lose on average because of the uncertainty surrounding midterm elections and since big legislative changes have already moved the markets.
Then midterms happen and uncertainty fades again. The president and parties start gearing up for the next election. Policy aims tend to be short-term and focus on the economy, which is good for markets.
That leads to incredible performance in year three, with average gains of 17%. Then the continued focus on economic policies in year four results in another good return.
Unfortunately for us, year two of this cycle started on Sept. 30. So, you shouldn’t be surprised if there is a slowdown in 2026. That doesn’t mean stocks will crash, but the massive gains we’ve seen in recent years could moderate.