What the 2026 midterms mean for your money, your plan, and your blood pressure
“It’s difficult to make predictions, especially about the future.”
I used that line at a client event a month before the election and credited it to Yogi Berra… though it turns out that Yogi never said it. The earliest known version of the quote shows up in a 1948 memoir by a Danish politician, yet nobody knows who said it first. Getting a quote about predictions wrong while making a point about predictions feels about right for election season.
The 2026 midterms will matter for plenty of things. For your portfolio and your financial plan, they may change very little.
Divided government does what divided government does
You know the results by now. The Democrats gained control of the House and the Senate, but without enough votes to override a presidential veto, expect plenty of noise and probably not much new law for the next 2 years. That gridlock has a quiet benefit for investors: everyone knows the rules for a while.
Looking back over 150 years, US stocks have risen in the year after most midterm elections (32 of 38), and it didn't matter much which party won. That doesn't mean every year is a good one. It just means elections are rarely what decides how your portfolio does.
Every House seat is on the ballot every 2 years along with one third of the senate, and with US life expectancy around 79, the average American sits through about 30 of these elections. Two years is a long time in politics and a very long time in markets. Whatever trends people are drawing from this election, 2028 will write its own story.
Up the hill and back down
The market around Election Day was a roller coaster: up the hill, then back down. Much of that came from short-term traders who placed hedges ahead of a known date with an unknown outcome and unwound them once the results were in. These market gyrations say very little about what any company is worth. Watching the markets closely is like measuring a freshly planted tree every minute. Between today and tomorrow that little tree might lose a few leaves, maybe even a branch or two, but it won’t be measurably taller. The lack of immediate growth is no reason to cut down a perfectly good tree. Wait 5 or 10 years though and that little tree might be towering over your house.
In a diversified portfolio, when one corner moves on an election, another tends to move the other way, which is what we’ve seen since November: some industries repriced lower, others higher, and the broad US indexes, at the time of this writing, sit just below all-time highs.
Our investment committee didn’t discuss the election once this year. It isn’t an input to our investment process; interest rates, inflation, and earnings are. What we did talk about was how to keep election headlines from steering anyone's long-term plan. BlackRock found that hypothetical investors who moved cash when their political party was out of power would have seen their returns cut roughly in half compared with those who stayed invested.
AI on the ballot?
The one place that the election hit markets directly was the AI buildout. Ballotpedia tracked 50 local data center measures in 13 states this year, more than half of them in Ohio and Illinois. Of the 47 decided by November 4th, 46 went in favor of more limits on development.
Projects already under construction won’t stop overnight. Projects still waiting on permits may pause, get more expensive, or move; but this isn't the end of the AI world, there are 50 states and plenty of open land (and don’t forget the moon). Markets were already uneasy about the cost of this buildout. Credit spreads had been widening on heavy borrowers, and some of the largest tech companies have started selling stock to help fund their spending. Most of the “hyperscalers” have now gone cash-flow negative due to their unprecedented capital expenditures.
While a slowdown could be bad for AI and related industries in the short run, it may be good in the long run. A prolonged buildout could give cash flows a chance to catch up with spending, allow bottlenecks in energy, memory, and other components time to ease, and enable AI companies time to learn what real demand looks like. Nobody knows yet whether AI will be the greatest thing ever, just okay, or a disappointment, and that heightened uncertainty will likely keep parts of the market volatile for a while. That is exactly how this is supposed to work. As Howard Marks said in his most recent memo: "It’s the investor’s job to bear risk in the pursuit of profit."
Where we can help
If this election has you thinking, here are a few ways we can help:
- Bring us the headline that’s bugging you. Tell us what has you uneasy, and we’ll show you what it could potentially do to your plan. It’s usually less than it feels like.
- Ask for help with complex investment issues. The multi-year bull market has created concentrated holdings for some people. There are several solutions to help diversify a portfolio in a tax-aware way.
- Use the quiet window for estate and tax planning. With big federal changes unlikely for 2 years, this is a good time to review your estate plan and gifting strategy.
Same why, different how
I won’t try to predict the 2028 election or the markets for that matter; both are futile exercises. I will predict that in 2 years when the texts and ads come back, someone will tell you again that it’s the most important election of your lifetime.
What you care about didn’t change on election night. Your values, the people you’re planning for, and the impact you want to have are the same as they were in October. The how may need a tweak here and there. The WHY should probably stay right where it is. Just like elections past, I don’t expect anyone in Wisconsin to stop hunting, fishing, farming, or manufacturing because of who won or lost in November.
So, the next time an election has you reaching for the sell button, ask yourself one question: what in my plan would I change because of a guess about the future?
