S&P 500: Democrats’ Congress Sweep Puts 80-Year Rally Record in Focus
Democrats won control of both chambers of Congress in the November 3 midterms, leaving President Donald Trump to govern with a divided Congress starting in January 2027. The S&P 500 has risen in all 20 completed 12-month periods after midterms since 1946, but technology stocks have fallen amid concern over possible scrutiny of data centers.
Democrats won both chambers of Congress in the November 3 midterm elections, a result that leaves President Donald Trump facing a divided Congress starting in January 2027 and has unsettled technology stocks. The market move puts a long-running pattern in focus: the S&P 500 has risen in all 20 completed 12-month periods after midterm elections since 1946.
The index gained 14.7% on average in those periods. But investors have also been weighing the possibility that a Democratic-controlled Congress could scrutinize the power and water demands of data centers, a central concern for technology companies.
Markets initially welcomed the election result. The Dow posted its biggest gain of the year the next day, before sentiment shifted. On November 5, the technology-heavy index fell 5.56%, while the VIX, a measure of expected market volatility, climbed to 28.18 from 16.61 a session earlier.
Historical returns have been similar under divided and unified government. Across 21 midterms since 1946, 16 produced a Congress controlled by the party opposing the president. The S&P 500 averaged a 14.6% gain over the following 12 months under divided government and 14.9% under unified government.
The strongest average in the historical comparison came when a Democratic Congress served alongside a Republican president. In nine such cases, the S&P 500 gained an average of 16.2% over the next year.
AI-related companies now account for more than 30% of the S&P 500, and Democratic lawmakers may press for tighter rules on data-center electricity and water use. The Department of Energy projects data centers could account for up to 12% of U.S. electricity demand by 2028.
PJM Interconnection’s independent market monitor called data-center load growth “the primary reason” for tight supply and high capacity prices on its grid. Congressional committees could also scrutinize permitting through hearings, even without new legislation.
Trading since the election has diverged across major funds. From election day through November 6, the SPDR S&P 500 ETF Trust fell 2.53%, while the SPDR Dow Jones Industrial Average ETF Trust declined 0.94%. The Invesco QQQ Trust, which tracks the technology-heavy Nasdaq-100, was down 13.41% over the past month.
Economic data offer other factors for investors to weigh. The economy grew at a 3.4% annualized pace in the third quarter, while the 10-year Treasury yield fell to 4.84% from 5.24% in early October. The Federal Reserve’s target rate was capped at 4.00%.
Consumer sentiment was weaker. The University of Michigan index fell to 48.1 in September, below the index’s recession threshold.
