If you're feeling bullish about 2026, Bank of America has some historical data that might dampen your enthusiasm. Turns out there's a well-documented pattern lurking in the market calendar that most investors seem to overlook: midterm election years are kind of terrible for stocks.

And we're not talking about a recent phenomenon. This goes back more than a century.

The Numbers Tell An Uncomfortable Story

Here's the baseline: since 1871, the S&P 500 has returned an average of just 3.26% in year two of the presidential cycle—roughly half the 6.43% average gain across all years. Your odds of making money also drop. The index finishes higher only 58% of the time in midterm years, compared with 65% in a typical year.

Now here's where it gets interesting. The pattern doesn't fade as markets modernize—it gets worse.

Since 1940, year two delivered an average gain of 4.22%, versus 8.85% in an average year. Since 1970, the gap widens dramatically. Across 14 observations, midterm years produced an average return of just 0.58%, compared with 9.25% for all years.

As Bank of America's chief technical strategist Paul Ciana points out, the weakness isn't evenly distributed. "January and June appear weak while March is supported," he notes. Since 1970, January has averaged a -1.77% return in midterm years, while June has fallen nearly -2%, both well below historical norms.

The Year-End Rescue Mission

Before you panic and sell everything, there's a twist. The fourth quarter of midterm years has historically acted as a pressure release valve.

Since 1940, the S&P 500 has risen in the fourth quarter of midterm years 86% of the time, delivering an average gain of 6.6%. Compare that to a typical year's fourth quarter, which averages just 3.9% with a lower success rate. October and November are particularly strong, with win ratios above 70%—among the best in the entire four-year cycle.

So the playbook looks something like this: struggle through the first three quarters, then rally hard into year-end as election uncertainty clears.

Except When It Doesn't Work

And then there's 2018, which serves as a useful reminder that historical patterns are guidelines, not guarantees.

That midterm year under President Trump, the Vanguard S&P 500 ETF (VOO) rallied midyear but then crashed over 13% in the fourth quarter. The year ended down -6.2%. That expected Santa rally? Never showed up. Instead, fears over Federal Reserve policy and escalating trade wars dominated the narrative and crushed the typical seasonal strength.

The Gold Alternative

While stocks tend to struggle in midterm years, gold has historically thrived. Since 1970, gold has risen an average of 15.1% during midterm years, significantly outperforming its long-term annual average.

The pattern shows strength right from the start—nearly 86% of first quarters in midterm years have been positive for gold, followed by a typical pullback in May and June and renewed strength heading into year-end.

Reading The Tea Leaves For 2026

If history is any guide, investors should brace for elevated volatility and modest returns through the first three quarters of 2026. Conditions could improve significantly as the year closes out, assuming the pattern holds.

But as 2018 demonstrated, these seasonal tendencies can break down when larger macro forces take over. The takeaway isn't that 2026 is doomed—it's that betting on a smooth year might mean ignoring a pattern that's been remarkably consistent for more than 150 years.

Wall Street's bullish 2026 forecasts may prove correct. They just might need to get through a historically difficult first three quarters to get there.