As the S&P 500 mounts a successive recovery, historical data suggests that the index is likely to face bearish sentiment in 2026.
Notably, the grim outlook comes as the S&P 500 ended the last session at 6,849, up 0.5%.
The index has managed to stage a remarkable performance, securing just enough gains to preserve its monthly winning streak. It has now logged seven consecutive green months, its longest streak since 2021.
S&P 500 in 2026
For 2026, it’s worth noting that the S&P 500 has historically shown significant fluctuations before midterm elections, with the average drawdown reaching 18.2% in the 12 months leading up to these events.
This pattern, observed as far back as 1926, reveals that the market tends to experience a notable decline in this period, with the smallest recorded drawdown being 7.4% and the largest a dramatic 41.8%, according to data shared by BarChart on November 29.
While the post-midterm performance has consistently rebounded, the pre-election phase often triggers significant market volatility.
The market’s behavior in this window has been shaped by policy uncertainty, shifting fiscal priorities, and investor caution as political risk rises.
While equities have historically rebounded strongly after midterms, the months before voting day have often delivered meaningful turbulence.
Therefore, if past trends hold true, the market could experience similar drawdowns in the 12 months prior to the election. Despite the eventual recovery post-midterms, the potential for a sharp correction remains high.
Wall Street bullish on S&P 500
This historical outlook comes despite a section of Wall Street remaining largely bullish on the benchmark index. As reported by Finbold, JPMorgan expects the index to reach 7,500 by the end of 2026 and sees the potential for it to exceed 8,000 if the Federal Reserve opts for deeper and faster rate cuts.
JPMorgan’s view is anchored in expectations of resilient economic growth, accelerating technological investment, and continued policy support.
Other firms remain constructive as well. For instance, Oppenheimer recently lifted its year-end target to 7,100, citing strong earnings and easing trade tensions, while UBS projects the S&P 500 to reach 7,500 by 2026 on the back of continued AI-related capital investment.
Featured image via Shutterstock
