Analysis

Stock markets in the grip of war panic? Investors look to US vote

War increases volatility, but stock exchanges will rise in 2026 due to the effect of the US elections

by Ken Fisher

10 March 2026

3' min read

Translated by AI

Versione italiana

3' min read

Translated by AI

Versione italiana

My forecasts indicate that stock markets are expected to grow by more than 10% in 2026, led once again by non-US listings. True, this was before the Iran war caused volatility, fears of a widening conflict and an energy crisis. Many assume that this changes everything. It doesn't. Markets discount worrying news in the open and then coldly move on. It is a historically recurring pattern in local conflicts, which will be repeated this time as well. And markets will not wait for peace to discount other hidden factors as well.

Like, for example, the US mid-term legislative elections in November, which are expected to cause an initial setback, followed by a sharp rise in the stock markets. The start of 2026 clearly has its peculiarities, but it fits well into this general pattern. That is why this trend of midterm years repeats itself and works.

Unlike in Italia, no early elections are held in the US, which fuels the tendencies typical of the usual legislative elections. At the beginning of the years in which mid-term elections are held - so called because they take place in the middle of presidential terms - alarmist tones prevail. As candidates vie for the nomination, they turn to the extreme factions of the two parties, leading to a sideways trend in the stock markets.

Then comes election time. Since 1926, the president's party has lost seats in the House in 22 out of 25 mid-term elections, with a median loss of 26 seats. Losses in the Senate, which, by the way, have occurred 70% of the time, are less frequent and smaller. The markets love this dynamic.

Why? Because of the resulting stalemate. Wide-ranging legislative initiatives heighten uncertainty and create winners and losers, making the stock markets shake. Mid-term elections eliminate this risk and make stocks soar. Prejudices linked to political affiliation prevent many from perceiving this phenomenon, which is thus not discounted in prices, giving rise to one of the market's best-kept secrets!

The S&P 500 index shows below-average returns in the first three quarters of the midterm election years, rising in only 48%, 56% and 60% of them respectively (in USD). In the fourth quarter, on the other hand, the stock exchanges celebrate the accentuation of the stalemate, as evidenced by the rise in 84% of the past and 88% of the cases in each of the following two quarters.

Some believe that the 'Trump factor' alters this dynamic. It does not. In 2022, the same was said due to the ongoing global bear market, but the mid-term phenomenon worked perfectly, just as I predicted. In fact, US stocks gained 25% in dollar terms from the beginning of the third quarter of 2022 until the second quarter of 2023.

The Republicans have a lead of four seats in the House and three in the Senate. All it takes is a slight shift in the mid-term elections to hand at least one of the branches of Congress to the Democrats: a formal stalemate seems likely.

Global markets would benefit. US and Italian stocks have a correlation of 0.70 (high, since 1.00 indicates a parallel movement and -1.00 an opposite movement). Between the US and Eurozone markets the correlation goes as high as 0.79. What favours US equities also favours European ones.

Remain calm, even though it may be difficult during a war conflict. Trust the hidden power of the midterm phenomenon.

Ken Fisher is Executive Chairman of Fisher Investments worldwide