The US midterms in 2026 went from relief to a landslide in three days. On November 3, Democrats took control of both chambers of Congress. The electoral anxiety that had plagued markets vanished on Wednesday, November 4, as the Dow surged 1,569 points, or 3%.
The S&P 500 had its worst day since the tariff shock in April 2025 on Thursday, November 5, when it dropped 4.36%. The Nasdaq Composite finished in a correction zone after falling 5.52%. The S&P 500’s eleven sectors all closed down.
The question is clear if you own US equities, either directly or through funds: history indicates that stocks often climb following elections, so what’s happening? Let’s go through every point of what happened, what the long-term record actually says, and why both things can be true at once.
What happened between November 3 and November 5
The election: Both the House and the Senate were won by Democrats. According to CNN’s forecasts, they would have more than 250 House seats and 54 Senate seats, their biggest House majority in over 20 years. Nine out of ten voters cited the cost of living as a significant influence in their decision to vote, while exit polls revealed that President Trump’s support was at a record low 38%. January marks the start of the new Congress.
November 4, Wednesday: Relief At 53,356, the Dow gained 1,569 points. The Nasdaq increased 1.4% and the S&P 500 increased 1.6% to 7,688.62. The most straightforward interpretation was relief: one source of uncertainty was eliminated now that the outcome was known.
Thursday, November 5 Reversal: Wednesday’s gain was more than erased as the S&P 500 dropped to 7,353.73. At 51,523, the Dow dropped 1,833 points, or 3.44%. About 12% less than its record close on October 6, the Nasdaq ended the day at 24,315.
Stocks related to chips and AI infrastructure saw the biggest drop. In a single session, Nvidia sank almost 9%, the Philadelphia Semiconductor Index fell more than 12%, and some data center operators lost more than 14%. The Nikkei in Japan and the Kospi in Korea, both of which have increased by more than 20% this year, were identified by analysts as likely to face pressure when Asian trade began on Friday.
Why the market turned: one explanation, not the only one
The most widely cited explanation links the selloff to the election itself, though not to who won. A market analyst at eToro argued that rising electricity prices turned the rapid construction of power-hungry data centers into a campaign issue.
Some Democrats have called for restrictions or pauses on new projects. The market’s reading, in his words, is that the AI buildout becomes slower and more expensive, which rewrites growth expectations across the whole supply chain.
That is an interpretation, and it should be treated as one. A portfolio manager quoted by Reuters called the move a capitulation phase for data-center beneficiaries but said the size of the declines looked outsized. Nobody can say yet whether November 5 was the low point or the start of something longer. Anyone who claims to know is guessing.
What the long-term record says
Analyst Stan Wong’s study of Bloomberg data, published by BNN Bloomberg on October 29, looked at every US midterm election since 1950. The S&P 500 was higher 12 months after all 19 of them, with an average price gain of 15.1%, excluding dividends. That is the “19 for 19” record.
The pattern is not universal. Canada’s TSX was higher after 14 of those 19 elections, averaging 11.6%. Differences in sector mix and commodity exposure mean the same political event does not lift every market equally.
Wong’s sector data, which starts in 1990 and covers nine midterm cycles, adds a detail that matters right now:
- Technology averaged a 30.9% gain in the 12 months after midterms and rose in all nine periods.
- Industrials averaged 13.5% and rose in all nine.
- Consumer discretionary averaged 17% and rose in eight of nine.
Technology is the sector with the best post-midterm record, and it is also the sector at the center of the November 5 selloff.
Why history and this week can both be true
The time frames are different: The 19-for-19 record measures where the index stands a year after the vote. It says nothing about the path in between. Wong himself notes that a positive 12-month return can include sharp corrections along the way. A single day, even a bad one, does not break a 12-month pattern. It also does not confirm it.
The sample is small, and the cause is unproven: Nineteen observations are not many, and stocks rise over most ordinary 12-month periods regardless of the election calendar. Wong is explicit that correlation is not causation. One reading of the pattern is that markets rally once political uncertainty fades. That story fit Wednesday. It did not survive Thursday.
Resolving one uncertainty can expose another: Knowing who controls Congress is not the same as knowing what Congress will do. This week the first question was answered and a second one opened: how policy on energy, data centers and AI might affect the companies investors had priced for years of uninterrupted growth. Wong also cautions that higher capital spending does not automatically produce higher share prices. Earnings growth, returns on capital and valuations decide that.
What to watch from here
- Whether the selloff continues or stabilizes: The following few sessions will reveal whether November 5 was a first leg down or a capitulation. One day does not establish a trend.
- Legislation versus rhetoric: Proposals to limit the development of data centers are not legislation. Investors are currently pricing on possibilities rather than choices because the new Congress won’t take office until January.
- The Fed: Regardless of the election, rate expectations can change as a result of the central bank’s December meeting and revised projections, which impacts growth stocks, the currency, and Treasury rates.
What this means if you hold US stocks
You do not need a view on Congress to act sensibly this week. A few checks are worth making:
- Look at your concentration: How much of your US exposure sits in AI, semiconductor and data-center themes, whether you own those stocks directly or through index funds and ETFs that are heavily weighted to technology?
- Separate the calendar pattern from your plan: A historical average is not a reason to hold, and one bad day is not a reason to sell. Your time horizon, goals and risk tolerance should decide, not a headline in either direction.
- Remember that diversification has two layers: On November 5, every S&P 500 sector fell, so spreading money across sectors inside equities gave no cover that day. Spreading across asset classes, such as bonds and gold alongside equities, is a separate question.
- Account for the currency: For an Indian investor, the return on a US holding combines the move in the US market and the move in the rupee against the dollar.
- Set the rules before the drawdown: Decide in advance what range your allocation can drift within before you rebalance. Rules made in calm conditions are easier to follow in volatile ones.
What is helpful here?
Try Jarvis Global Market, the SEBI-registered US multi-asset portfolio from Jarvis Invest, is built on that second idea. Equities are the engine, but they sit alongside tactical fixed income and selective commodity exposure through gold and silver.
When risk rises, the fixed-income allocation can shift toward US Treasuries and investment-grade bonds. Allocation follows AI-driven rules and continuous monitoring rather than discretionary calls. The stated aim is for exposure to respond to US macro trends, liquidity, volatility and market sentiment, not to headlines.
The research framework behind it includes US macroeconomic and policy indicators, sector and industry trends, liquidity and sentiment signals, price behaviour, and company fundamentals and earnings quality. Policy-driven sector risk, such as the data-center debate that surfaced this week, is the kind of development those layers are designed to track.
No structure removes drawdowns, and equities can fall in any multi-asset portfolio. What a framework can do is replace reacting in the moment with a process set in advance. Global Market is designed for investors with a corpus of ₹25 lakh to ₹5 crore or more who want structured exposure to US markets. If that describes you, you can schedule a deep dive call with the Jarvis team or read more at Jarvis Global Market.