Barclays told clients on Wednesday that the market strains tied to midterm elections tend to build through late summer and then give way to a pronounced post-election recovery, with technology companies among the clearest beneficiaries.
In a note, analyst Venu Krishna framed weaker S&P 500 returns during midterm years as "a well-documented phenomenon," noting that underperformance relative to non-midterm years is most evident in August and September when election-related uncertainty and risk premiums reach their maximum.
Krishna added that the trend generally reverses after votes are cast. "Following the election, risk-on sentiment tends to pick up materially, leading to better-than-average S&P 500 returns over the subsequent year," he wrote. Barclays’ research shows Tech, Growth and Quality segments have been the most consistent leaders in this window, outperforming in all but one of the last nine midterm cycles.
The bank points to a fall in policy uncertainty as the primary mechanism behind the pattern. Barclays noted that the year following midterms "averages the lowest economic policy uncertainty over the four-year Presidential term," and argued that technology shares are particularly sensitive to that reduction because of their global revenue exposure and sensitivity to trade and national security concerns.
Discussing possible outcomes for the 2026 midterms, Barclays’ base case envisions a divided government - a Republican president, a Democratic House and a Republican Senate. The firm said such an outcome would likely produce legislative gridlock and, in turn, lower policy risk.
Krishna concluded by reiterating the firm's constructive stance on U.S. equities. He noted the S&P 500 is trading at roughly 20 times next-twelve-month EPS, which he described as comfortably below two-, three- and five-year average multiples. Barclays would treat any near-term unwinding of positioning as "a buying opportunity, with a bias toward Tech."
Investment implications
Barclays’ analysis frames the midterm calendar as a cyclical source of market volatility that historically resolves into stronger returns for equities, particularly for sectors most exposed to policy risk. The bank’s view underscores a preference for technology, growth and quality exposures into the post-election period.