Justin Banks
Growth & Momentum Trader, Founder of Wolves of Wealth
Fed hiking-cycle history gives the S&P 500 another favorable setup alongside post-midterm seasonality. The index rose in all seven completed multi-meeting hiking cycles since 1983, averaging about 10%; it also rose 12 months after the final hike in seven of eight cases, averaging about 20%. Along with the 19/19 post-midterm 12-month and 21/21 post-midterm November-to-June records, these streaks lining up in 2026 are very hard to ignore, though history guarantees nothing. x.comÂ
The S&P 500 looks set to rise after the midterms, historically the best stretch of the presidential cycle. Since 1950 it has been higher 12 months after all 19 midterms, averaging about 16%, and every November-to-June period after a midterm since 1942 has been positive, averaging 16.6%. The year after midterms has been the strongest of the cycle at about 18%, per LPL, so a difficult midterm year does not predict what follows. x.comÂ
Post-midterm seasonality favors further S&P 500 gains from 2026's late-October starting point. Q4 of a midterm year through Q2 of the next year has been the cycle's best nine months, averaging about 20% since 1949. Since 1950, the index was higher six months after October 26 in all 19 midterm years, averaging about 15%. In all seven years entering late October up 5-20% year to date, as in 2026, it rose three, six and twelve months later. x.comÂ
The S&P 500's post-midterm record makes 2027 pullbacks worth buying, though history does not guarantee another gain. It rose in the year after all 19 US midterm elections since 1950, averaging 15.4% over 12 months, 12.4% in six months and 5.7% in three months. Take advantage of market swings by buying pullbacks. x.com x.comÂ
The S&P 500's heavier semiconductor weighting makes its coming pullback likely larger than the 4% decline in the comparable 1995 period. Its current 16-17 week cycle looks more like November 2025 to March 2026 than the last bullish cycle, pointing to at least the lower Bollinger band in November, with a cycle low due in the month's second half. x.com x.comÂ
US equities tend to perform well after October in midterm years, making the historical pattern hard to ignore. Since 1950, the S&P 500 rose in 19 of 19 observed 12-month periods after October, averaging 16.6% with a 3.0% worst return. October and November also averaged gains, but history is not a promise. x.comÂ
Post-midterm market strength calls for patience with US large-cap equities. KHerriage's quoted post cites an average S&P 500 gain of 29.9% over the next 15 months in post-midterm periods since 1950, with gains in 19 of 19 years. x.comÂ
The 10-year yield above 5% limits how far the US equity rally can stretch, even as stocks shrugged off the Fed hold. Two policymakers wanted a hike, the 10-year rose to about 5.04%, and bonds sold while all four major indices closed higher. Rates need to cool for the rally to extend. x.comÂ
Post-midterm seasonality and hedge funds' flip from long to short make this reset the next great opportunity to build for a bull market driven by the Innovation Revolution. Since 1950, the S&P 500 has gained 29.9% on average over the next 15 months in all 19 comparable years. This selloff looks pre-war driven; military action looks nearly certain and may be the most anticipated and discounted ever. A 90-day, 32% Nasdaq bear market preceded the dot-com era's final 18-month melt-up. x.com x.comÂ
Crowded fund shorts despite market participation give the S&P 500 a strong upside bias, reinforced by midterm seasonality. Net leverage this low usually appears deep in a bear market or near the end of capitulation. A rally is highly probable, but another 1.5 to 3 weeks of pain is possible: the market could be lower in two weeks, higher in a month and much higher in six months. The S&P 500 has historically gained over 14% after midterms, though there are no guarantees. x.com x.com x.com x.comÂ
Energy's continued push on inflation is concerning for the S&P 500. Energy's strength relative to SPY looks very similar to the start of the 2021-22 inflation bear market, when repeated closes above the 50-week average preceded a surge. Last week's close above the five-week average echoes March 2026. x.comÂ
US stocks benefit when rates rise with growth because earnings outpace the drag from higher discount rates. Such periods have historically been very bullish, unlike inflation-led rate rises amid slowing growth. Since fall 2025 the 10-year yield rose from 4.1% to 5.1% while nominal GDP growth accelerated to 6.6%, faster than rates. Being long offers better risk/reward; high oil prices due to the war are the remaining inflation pressure, and an end to the war would improve the setup further. x.comÂ
