High US stocks and BTC halving: is the election effect real or false?

According to Woofun AI, IOSG Ventures analyst Darko pointed out that with the approach of November 3, 2026, the “election effect” was once again placed in the market spotlight, but the high level fluctuation of US stocks and the misalignment of the BTC cycle made this traditional narrative face a severe test. Historical data shows that since 1950, the US has held 19 midterm elections, and the S&P 500 index was higher than on the day of voting one year after each election; while Bitcoin only experienced 3 full cycles, it also showed the characteristics of rising prices one year later, but sharp fluctuations in the short term often caught investors off guard. The position of the two markets in 2026 is quite different: US stocks are close to historical highs, while Bitcoin is still struggling to recover from the sharp sell-off in the previous period. This structural difference means that the direct application of the historical average may fall into a misunderstanding. The more complicated variable is that Bitcoin's election cycle is highly coincident with the halving cycle, making it difficult to separate the two's independent contributions to price influence, thus raising deep questions about the reality of the so-called “election effect.”

This cyclical overlap not only blurs the causal chain, but also brings huge uncertainty to predicting future trends, forcing market participants to re-examine the correlation logic between political events and asset prices.

Looking back at the historical performance of US stocks, a seemingly unbreakable iron rule emerged: in the 19 midterm elections from 1950 to 2022, the S&P 500 never recorded negative gains in the following 12 months.

This phenomenon is extremely statistically significant, with an average increase of 15.1% and a median of 14.5%. Even in the weakest case, the market achieved positive growth of 1.1%. In contrast, in non-midterm election years, if the return for the following year is calculated starting in early November, the average value is only 7.2%, and only about 70% of the sample recorded an increase.

This comparison strongly suggests that there is indeed some kind of special market momentum in the midterm election year. However, if you dig deeper into the details of the data, you'll find that most of the historical decline occurred before, rather than after, the election. Within the six-month observation window set around polling day, 17 of the 19 elections had market lows before polling day, which meant that pre-election adjustments were often a prerequisite for a post-election rebound. The situation in 2026 was different. US stocks had already accumulated significant gains before the election and were only one step away from their all-time high. This “high starting point” challenged the traditional post-election upward logic. Investors need to be wary that although the long-term trend is optimistic, the magnitude and direction of short-term fluctuations may deviate from the historical normal. Especially when market sentiment has fully priced the election results, additional room for growth may be compressed.

To more accurately assess 2026 risk exposure, we need to compare historical retracement data. In the past year before the midterm elections, the median of the biggest retracement in US stocks reached 16%, which provided sufficient momentum for a rebound after the election. However, in 2026, this indicator is only around 9%, which means that the market needs to “recover” for a limited amount of decline, and the upward elasticity after the election may not be as flexible as in previous years.

This difference is even more pronounced in the Bitcoin market, where statistical robustness has been seriously weakened since only 3 samples are available for reference. More importantly, these three midterm elections (2014, 2018, and 2022) all took place between two and two and a half years after Bitcoin was halved, and they were all in a bear market phase.

This cycle coincidence makes it impossible for us to determine whether the price increase is due to policy expectations brought about by the election or the supply and demand laws inherent in the halving cycle. Taking 2026 as an example, the November election is about two and a half years away from being halved in April 2024, which is highly consistent with the historical sample. Therefore, attributing Bitcoin's potential rise to the “election effect” is a logical fallacy; the more plausible explanation is that the market is going through the second half of the halving cycle, and the election is just a time stamp. If investors ignore this background and blindly bet on the post-election market, they may lose money due to cycle mismatches.

Further disassembling the composition of US stock returns after the election, it can be found that its rise did not happen overnight, but rather at a specific time rhythm. BlackRock (BLK.US) analysis indicates that as the election results gradually became clear, US stocks in history usually started rising about a month before the midterm elections, rather than waiting until the voting was over to start. Data from late October 2026 confirm this trend, predicting that the probability given by the market that the Democratic Party will control the House of Representatives is about 93%, and the probability of controlling the Senate is about 68%.

This high-probability expectation means that the situation where the president and the National Assembly belong to different political parties has been widely digested by the market, and may not necessarily trigger a violent unexpected reaction on election day. When the results are in line with expectations, the market often shows “buying expectations and selling facts”, that is, the rise before the election already reflects the benefits of policy stability ahead of time. Therefore, voting day is more of a time reference for observing the market than an absolute sign of a turning point in the market.

Notably, this “early response” mechanism is particularly evident in strong markets, as investors tend to lay out assets with high certainty ahead of time. For the 2026 market, due to the large increase before the election, the upward momentum after the election may be more dependent on continued improvement in corporate profits rather than simply election dividends. Investors should pay close attention to changes in capital flows before and after the election. In particular, whether institutional capital has completed the position adjustment layout before the election. This will directly affect market performance after the election.

Comparing the pre-election intensity of the historical midterm election year, we can also find another phenomenon worth paying attention to. In late October 2026, the S&P 500 was only about 3% from its all-time closing high set on October 6, compared to the previous year's biggest retracement of about 9%.

This kind of “high starting point, shallow retracement” market state is not unusual in history, but the sample size is extremely small. Only five midterm elections in history have met these two conditions at the same time: a pre-election rise of more than 10% and a pullback of less than 10%. They occurred in 1954, 1958, 1986, 2006, and 2014, respectively. The subsequent performance of these cases was tracked and found that the return for the following year ranged from 1.1% to 33.2%, with a median of 6.7%.

This figure is far below the overall median of 14.5% for the 19 elections, indicating that with a high starting point, the room for growth after the election is indeed limited. More importantly, this broad range (1.1% to 33.2%) reveals a high degree of uncertainty about the results, and it is likely that the rise will either continue or be mediocre. As for the 2027 market outlook, it is unreasonable to apply the historical average increase of 15.1% directly; a more reasonable forecast should be based on a median of 6.7% under these specific conditions. Investors should lower return expectations, pay attention to risk management, and avoid excessive increases in positions at high levels.

According to data compiled by Woofun AI, Bitcoin's historical performance showed a very different characteristic: the harsh reality of falling and then rising after choosing. In the three full midterm election cycles of 2014, 2018, and 2022, BTC experienced a decline within weeks of voting day, although the price was higher than on election day a year later.

This “hold back first, then rise” trend is unbearable for many short-term investors, especially in 2018, where the post-election decline continued for a long time and was quite large. The only exception was 2022, where the decline lasted a short time, and by three months after the election, BTC had already recorded an increase.

However, this doesn't change the pessimistic tone of the overall trend. According to Binance research, Bitcoin's average increase in the year after the midterm elections was about 54%, which is roughly in line with the average increase of 53.8% in our sample. But this average masks huge fluctuations in the process: the median return was around -31% three months after the election, and around +45% after 12 months.

This means that even if investors finally see the right direction of recovery, they may bear considerable losses before the rise arrives. For liquidity-sensitive leveraged traders, this short-term deep pullback may lead to forced liquidation, thereby exacerbating the market decline. Therefore, Bitcoin's “election effect” is not a simple upward signal; it is a volatile process accompanied by high risk, and investors need to have sufficient patience and risk control ability.

Analyzing Bitcoin's cyclical trap in depth, we will find two key variables: halving coincides with changes in investor structure. First, as mentioned before, every midterm election happens about two to two and a half years after Bitcoin is halved, and they are all in a bear market phase. The November 2026 election is also about two and a half years until the April 2024 halving, a point in time that is highly consistent with the historical sample. Therefore, it is impossible to determine whether the election had a substantial impact on this pattern; more likely, the market is following the inherent rhythm of the halving cycle. Second, with the entry of spot ETFs and corporate treasury funds, Bitcoin's investor structure has fundamentally changed.

In the past, retail investors dominated the market and sentiment fluctuated greatly; now, institutional capital is an important player, and their investment decisions are based more on fundamentals and long-term value. These channels can bring about stable demand, but they can also transmit redemption pressure, financing pressure, and changes in risk appetite to the market. For example, when the macroeconomic environment deteriorates, institutional capital may be rapidly withdrawn, causing market liquidity to dry up. Therefore, the historical retail behavior model cannot simply be applied to today's market. Investors need to pay attention to the whereabouts of institutional capital and changes in positions to judge the true level of support in the market.

In terms of policy gaming, the CLARITY Act impasse and regulatory uncertainty have become important factors affecting the crypto industry. On September 15, the Senate failed to pass a procedural motion to end debate and advance the bill with 49 votes in favor and 50 against. Subsequently, the Senate submitted a motion for reconsideration, so the bill is currently at a standstill and has not completely lost the opportunity to restart. However, before the election was adjourned, the Senate did not vote for a second time; the only window left in the current National Assembly was the “lame duck session” after the election and before the new National Assembly took office.

Legislation during this period was generally less efficient, as lawmakers were more concerned with re-election issues than long-term policies. The next National Assembly will decide on the election of leaders of each committee, legislative priorities, and specific conditions for renegotiations. If the Republican Party maintains the Senate, it may be more conducive to policy proposals that promote industry preferences, but there is no guarantee that the bill will be passed; similarly, if the Democratic Party controls the National Assembly, it does not mean that bipartisan cooperation legislation is impossible.

At the same time, regulators can still act within their existing powers, develop rules and issue staff guidelines, which may be able to resolve some specific issues, but their scope of application and durability may not necessarily be comparable to formal legislation. This policy uncertainty will haunt the crypto industry for a long time, affecting corporate strategic planning and investment decisions.

Looking ahead, the 2027 market's supporting factors will depend on multiple indicators such as corporate profit, liquidity, and capital flow. As far as US stocks are concerned, continued growth in corporate profits and relief from the pressure brought about by bond yields will help the market rise further.

If the rally spreads from big tech companies to more companies, the recovery will also be more persuasive. Conversely, no matter which party controls the National Assembly, high inflation or earnings fall short of expectations will weaken the reason to be bullish. Regarding Bitcoin, I will focus on whether spot ETFs can continue to attract capital, whether liquidity improves, and whether Bitcoin can maintain its previous gains when the overall market weakens.

If capital outflows continue, or financing pressure rises again, it is not appropriate to easily assume that the low point of the bear market has passed. The following three changes are particularly noteworthy: At the Federal Reserve interest rate meeting on December 8-9, the Federal Reserve kept interest rates at 3.75%-4.00% on October 28. Two members voted against it, and the market also began to include the possibility of interest rate hikes in December. The new economic forecast will help determine whether the pressure on bond yields is easing; the coverage of profits and increases, and whether profit growth and stock price increases can spread from companies currently leading the index to more companies; Bitcoin capital flow, whether institutional demand can be maintained for several weeks, not just individual transactions It appears in concentrated days. The election results should be observed along with these indicators; there is no substitute for them. Only when improvements in fundamentals resonate with favorable policies can the market usher in a real bull market.

In summary, the strongest finding in historical data is the high degree of consistency that US stocks continued to rise after the midterm elections, but the stock market was already quite strong before the 2026 vote, which limited room for growth after the election. Bitcoin's message is different: in the three full cycles, the price was higher after one year, yet investors all experienced further declines. This helps to understand holding risks, but it is not enough to support a clear forecast for the next cycle. The November 3 election will affect the future policy environment, but whether the market can continue to recover in 2027 will ultimately depend on subsequent corporate profits, liquidity, and capital flows. Investors should abandon blind superstitions about the “election effect,” focus instead on substantial changes in fundamentals, and deal with uncertainty through diversified asset allocation. This is not only respect for historical experience, but also rational management of future risks. In an environment where policy impasse and market fluctuations coexist, maintaining cautious optimism and adapting strategies flexibly is the key to getting through the cycle.