US WEEKLY KICKSTART: The 2026 midterms and US equities

Research evidence excerpt

US WEEKLY KICKSTART: The 2026 midterms and US equities

Goldman Sachs US Weekly Kickstart

The US equity market around midterm elections

With the 2026 midterms three months away, investor focus is likely to turn

increasingly to elections in coming weeks. Midterm elections will take place this year

on November 3. During the last few decades, economic policy uncertainty and equity

market volatility have typically begun to rise in the late summer ahead of midterm

elections. Our economists have found the same pattern after adjusting for the economic

cycle as measured by the unemployment rate.

Exhibit 1: Policy uncertainty typically rises ahead of Exhibit 2: S&P 500 volatility usually rises ahead of

midterm elections midterm elections

160 22%

Median monthly Economic

Midterm S&P 500 median monthly

140 Policy Uncertainty elections 20% realized volatility Midtermelections

Midterm election years

All years since 1985 18% All years since 1974120

16%

14%

12%

10%

8%

May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Source: Policyuncertainty.com, Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research

Alongside elevated uncertainty, mutual funds and foreign investors have typically

demonstrated reduced demand for US equities ahead of midterm elections. Around

the past 10 midterm elections, US mutual funds increased their cash holdings by an

average of 0.4% of AUM during the 3 months before the elections and then reduced

those cash positions by 0.6% during the 3 months post-election. Similarly, foreign

investors on average sold 0.1% of their US equity assets during the 3 months before the

election and then added 0.5% during the subsequent 3 months.

Mirroring the pre-election patterns in uncertainty, volatility, and investor flows, US