Will Stocks Finish Strong in 2026?
Ken Fisher explains the 'Midterm Miracle' phenomenon, which shows that the fourth quarter of a president's second-term midterm election year and the subsequent two quarters historically represent the most consistently profitable nine-month period for stock markets. He expects strong market performance through the end of 2026 and into early 2027 based on this historical pattern.
Summary
Ken Fisher addresses the common question about whether stocks will finish strong at year-end by presenting historical evidence for what he calls the 'Midterm Miracle.' This pattern specifically applies to the fourth quarter of the second year of a president's term, followed by the first and second quarters of the president's third year—a nine-month stretch with approximately 95% historical profitability and 88% profitability specifically in the fourth quarter over the last hundred years.
Fisher explains the underlying mechanism for this phenomenon through political economy. After midterm elections, the president's party typically loses power relative to the opposition, and the president loses leverage over members of his own party, particularly in the Senate where two-thirds of sitting senators of the president's party no longer face electoral consequences and can effectively 'wait out' the president's remaining tenure. This political dynamic causes markets to price in reduced legislative risk—major legislation virtually never passes in the back half of a president's term, and even less frequently during a second term when the president has diminished influence.
Applying this framework to 2026, Fisher notes that we are currently in the third quarter approaching the fourth quarter of the second year of the president's term. He cites the 'One Big, Beautiful Bill' as the major legislative achievement of the first two years, with failed attempts at voter ID legislation having cost political capital. With the window for major legislation effectively closed, markets begin to reflect this reduced political uncertainty.
Fisher concludes that while markets are volatile and he could be wrong, his expectation is that the back of 2026 will be strong and this strength will ripple into early 2027. He acknowledges that occasionally one quarter within this three-quarter stretch may go negative, but historically the three quarters together end up being very profitable.
About this episode
Ken Fisher, Founder, Executive Chairman and Co-Chief Investment Officer of Fisher Investments, explains why he believes stocks are likely set up for a strong finish to 2026. At the heart of Ken’s outlook is a political phenomenon he calls the “Midterm Miracle.” As Ken explains, the president’s party generally loses power in Congress after the midterm elections. That shift makes big, controversial legislation far less likely to pass. Presidents know this, which is why they tend to push their most onerous bills through Congress in the first two years of a presidential term. Once midterm elections conclude, the opposition party typically gains ground in Congress, resulting in more political gridlock. And Ken explains why this gridlock tends to be good for markets. It lowers the risk of sweeping legislation that can rattle businesses and stocks. According to Ken, stocks are consistently profitable in the fourth quarter of a president’s second year and the first and second quarters of the subsequent year. It’s a remarkably durable trend, and Ken expects it to hold up again in 2026 and into 2027. Ken Fisher writes monthly, native language columns in major media organs around the world. In total, Ken Fisher’s 31 bespoke columns span more countries and more languages in more total reach than any other, non-syndicated columnist of any type ever. For more of Ken Fisher's thoughts on the markets, visit us at https://www.fisherinvestments.com. To make sure you never miss an update, subscribe to our channel: https://www.youtube.com/@fisherinvestments?sub_confirmation=1. Wondering what the markets hold ahead? Get the timely insights that can shape your next move: https://www.fisherinvestments.com/en-us/campaigns/smo/lf?PC=OSCALFNO28&CC=XXXX Have any feedback on this video? We would greatly appreciate if you could complete this 1-minute survey: https://fi.co1.qualtrics.com/jfe/form/SV_6Vw1ezlogR044S2?VideoCode=KFWeekly17Sep2025 Want to learn more about the insights and support our clients enjoy? Explore Fisher Investments' free educational webinars: https://www.fisherinvestments.com/en-US/insights/webinars To learn more about Fisher Investments’ reviews of markets and financial topics, download the Fisher Market Insights Mobile App, available for iOS on the App Store (https://apps.apple.com/us/app/fisher-investments/id1169932255) and for Android on Google Play (https://play.google.com/store/apps/details?id=com.fisher.investments&hl=en_US). Connect with Fisher Investments on: • Facebook - https://www.facebook.com/FisherInvestments • X - https://twitter.com/fisherinvest • LinkedIn - https://www.linkedin.com/company/fisher-investments • Instagram - https://www.instagram.com/fisher.investments • TikTok - https://www.tiktok.com/@fisher_investments You can also follow Ken Fisher here: • Facebook - https://www.facebook.com/KenFisher.FisherInvestments • X - https://twitter.com/KennethLFisher • LinkedIn - https://www.linkedin.com/in/ken-fisher/ • Instagram - https://www.instagram.com/kenfisher_fisherinvestments/ Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice.
Key Insights
- The fourth quarter of a president's second-term midterm election year followed by the first and second quarters of the third year historically represent the most consistently profitable nine-month stretch in US and global stock market history, with approximately 95% profitability
- Presidents lose significantly more legislative power after midterms in their second term because senators of the president's party no longer face electoral consequences and can essentially 'wait out' the remainder of the president's tenure
- Markets price in reduced political risk aversion after midterm elections because major legislation virtually never passes in the back half of a president's term, particularly during second terms when presidential influence is diminished
Topics
Transcript
[0:05] So, it doesn't matter when it is. January. April. February. September. This year. Last year. Next year. Any other year. People are always asking, "Do you expect the market to be strong toward the end of the year or a week, or what do you think?" Stuff like that. Said simply, and you know we're in the second year of [0:41] a president's second term, but just being in the second year of a president's term tells you, as you also know, that we're, as I speak, in the third quarter of the year, that we're approaching the fourth quarter of the year. The fourth quarter of a midterm election year and the two subsequent quarters, first and second…
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