According to market observers, while Donald Trump's tenure has seen some of the most violent swings in stock market history, there is no denying that the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite delivered exceptional returns during his time in office. The so-called Trump bull market has been fueled by multiple forces, including the evolution of artificial intelligence, better-than-expected corporate earnings, and a record wave of stock buybacks spurred by the Tax Cuts and Jobs Act, which permanently slashed the top corporate marginal income tax rate from 35% to 21%.

Yet history suggests bull markets are not endless, and there is always a catalyst lurking to trip up equities. With less than eight weeks until the midterm elections, one of Wall Street's biggest uncertainties is now front and center. On November 3, American voters will head to the polls or cast mail-in ballots in the 2026 midterms. While Trump's term extends to January 20, 2029, the composition of both chambers of Congress remains very much up in the air by early January 2027. Would a congressional power shake-up trigger a stock market crash? Looking back over 75 years, the answer is surprising, and ultimately leans optimistic.

Congress is widely expected to flip in November

At present, the Republican Party controls a unified government. Aside from the White House, they hold 53 of 100 Senate seats and 218 of 435 House seats. This "unified government" has made passing major legislation far easier. Trump's first two years in each of his two non-consecutive terms featured a unified government, and it was precisely why he was able to sign two massive tax and spending bills. The aforementioned Tax Cuts and Jobs Act in December 2017 permanently lowered the top corporate marginal rate, while the "One Big Beautiful Bill" in July 2025 made the individual tax brackets from that earlier law permanent. If the GOP loses control of one or both chambers, passing significant legislation becomes far harder, if not nearly impossible. It would also complicate debt ceiling negotiations, potentially leading to government shutdowns. While past shutdowns have not triggered market crashes, they do heighten short-term uncertainty.

According to prediction markets, the probability that Democrats gain seats on November 3 and reclaim one or both chambers of Congress is very high. Polymarket odds as of September 13 showed a 53% chance Democrats win both chambers, and a 34% chance Democrats take the House while Republicans hold the Senate. Either way, the odds strongly favor a congressional shake-up 52 days from now. Furthermore, historical patterns show that the party holding the presidency almost always loses seats in midterms. In the prior 23 midterm elections, the party in the White House lost seats 20 times. The bearish case for stocks is simple: a rebalanced Congress could lead to bipartisan gridlock.

But 75 years of data tell a different story

Volatility is nothing new during Trump's time in office. The five-week COVID crash from February to March 2020, and the tariff shock in early April 2025, both produced some of the largest short-term percentage swings ever seen in the Dow, S&P 500, and Nasdaq. Statistically, midterm election years are known for heightened uncertainty and deeper market drawdowns. Last November, Ryan Detrick, chief market strategist at Carson Group, posted data on X examining the peak-to-trough declines in the benchmark S&P 500 during midterm years. Since 1950, the average intra-year pullback in a midterm year has been 17.5%, a much larger drawdown relative to the other three years of a presidential term.

While that may not sound like good news, Detrick also pointed out in another post on X that there is a considerable difference in stock market performance between a president's second year and sixth year in office. Going back 75 years, six presidents, including Trump, have served two full terms (Richard Nixon does not count because he was removed from office in August of his sixth year). The second year has been risky, with the S&P 500 falling during the terms of Bill Clinton, George W. Bush, and Donald Trump, but every two-term president saw their sixth year end higher. Since 1950, the average gain for the S&P 500 in a second-term president's sixth year is nearly 21%. As context, through last Friday's close, the S&P 500 was already up 11.85% year-to-date.

If this trend continues into 2026, it could likely be attributed to two factors. First, from an investment standpoint, political gridlock can be viewed as a positive. While a divided Congress makes debt ceiling negotiations more uncertain, there will be no major legislation passed, adding a degree of certainty that Wall Street and investors tend to appreciate. Second, the importance of AI infrastructure buildout outweighs the midterms. The latter may have a bigger practical impact on households, but the construction of AI data centers, along with sustained earnings beats, is laying the groundwork for one of the strongest bull markets in history. While a sharp stock market decline remains possible this year, history suggests the midterms are unlikely to be the spark that sets it off.