Will the Stock Market Crash in 2026? History Says It May Happen as This Event Draws Near.
Yahoo Finance ·
The U.S. stock market is having another fantastic year. The S&P 500 ( ^GSPC +0.42% ) is up 11% in 2026. If the benchmark index simply stays at its current level, it will mark the fourth straight year of double-digit gains, something that last happened during the dot-com bubble in the late 1990s. However, the S&P 500 tends to drop sharply around midterm elections, and the stakes are particularly high this year because the Democrats could win control of the House, leaving Congress split. That would make it very difficult for the Trump administration to pass major legislation, which means midterms are a major source of policy uncertainty. Since its creation in 1957, the S&P 500 has consistently performed poorly during midterm election years. The index has suffered an average intra-year drawdown of 18%, and those declines almost always came in the third or fourth quarters. In other words, history says the S&P 500 will close 18% below its high at some point in the remaining months of 2026.
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The S&P 500 has risen 11% in 2026, signaling a potential fourth consecutive year of double-digit returns. However, midterm election years historically exhibit increased volatility in the second half due to policy uncertainty. Given that historical data shows an average intra-year decline of 18% during midterm years, investors should prepare for potential corrections.
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- U.S. Stock Market — Policy uncertainty ahead of midterm elections and an average 18% intra-year decline based on historical data are weighing on investor sentiment. Fears of legislative gridlock in the event of a split Congress are expected to exacerbate market volatility.
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