[Edaily Reporter Bang Sung Hoon ] With the U.S. midterm elections over, Wall Street is watching to see if the historical “post-election rally” will repeat itself this time. Since 1930, the U.S. stock market has never fallen in the year following a midterm election.

According to MarketWatch on the 4th (local time), Tom Essaye, CEO of Seventh Report Research, analyzed that from 1930 to the present, the S&P 500 Index has never declined during the 12 months following a midterm election. The average return during this period was 14%, significantly exceeding the S&P 500’s historical annual average return of 10.5%.

The market trend immediately following the election was also positive. Since 1950, November in midterm election years has been the second-best month of the year for the S&P 500 Index. It rose by an average of 2.7%, and the index posted gains in 79% of those years.

The three quarters following the election—the fourth quarter of the midterm election year and the first and second quarters of the following year—have historically yielded the highest returns across the entire presidential election cycle.

The market also viewed the election as a “resolution of uncertainty” that day. Although stock index futures fell overnight, major indices rebounded sharply once regular trading began. The S&P 500 rose more than 1.5% during the session.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as the “fear index,” plummeted by more than 20% during the session. It was on track to record its largest single-day drop since April 9 of last year, when President Donald Trump announced a three-month tariff reprieve.

This is believed to be the result of a combination of expectations that Democrats might eliminate tariffs on Canadian products and a sense of relief that the election is over.

From a monetary policy perspective, analysts suggested that the Democratic-controlled Senate would serve as a “firewall” against the Federal Reserve (Fed). Rabobank noted that even if a Fed board seat were to suddenly become vacant, the Senate could block President Trump from appointing one of his close associates.

Michael Feroli, an economist at JPMorgan, pointed out, “The only Fed governor whose term expires within the next two years is former Chair Jerome Powell, whose term ends in January 2028.”

Treasury yields fell today due to the election results and Treasury Secretary Scott Bessent’s renewed suggestion of reducing long-term Treasury issuance. According to the CME Group, the interest rate futures market still expects the Fed to raise rates next month. However, expectations for additional hikes next year have weakened.

A slowdown in investment in artificial intelligence (AI) infrastructure was cited as a key variable. In the midterm elections, opposition to data center construction appears to have swayed voters.

Warren Pice, founder of 3Fortin Research, who accurately predicted the Democrats’ landslide victory, noted, “All other things being equal, rising computing costs favor companies that currently own data centers.” Conversely, so-called “neo-cloud” companies like CoreWeave, which rent out computing power, may face difficulties.

It has also become unclear whether semiconductor companies such as NVIDIA and Micron will be able to meet next year’s revenue targets projected by Wall Street. Pice warned, “Even a slight slowdown in data center construction will cause semiconductor revenue to fall short of expectations.”

In fact, while shares of Big Tech companies such as Alphabet, Microsoft, Meta, and Amazon rose that day, stocks in the semiconductor, neo-cloud, and AI infrastructure sectors fell.

Fiscal issues also remain. Jonathan Pringle, a strategist at UBS, predicted that temporary volatility could increase ahead of the budget deadline on the 11th of next month. He expected that an agreement to raise the debt ceiling would not be reached until the second half of next year.

He also projected that the budget deficit would remain at around 6.5% of gross domestic product (GDP), as Democrats seek to delay or reduce cuts to food assistance and healthcare subsidies for low-income households—cuts included in President Trump’s massive tax cut and spending bill passed last year. While the fiscal stimulus’s impact on the economy will diminish somewhat next year, he predicted that its full effect would not be felt until 2028.

Pais, the founder, emphasized that aside from seasonal strength, there are other variables investors should keep an eye on, noting that the key one is whether the technology sector can weather the slowdown in AI infrastructure investment without major issues.