Russell 2000 heads into the vote up 15.1% against a 0.5% average across 11 midterm years
Russell 2000 is up about 15.1% this year, but Furey Research found an average 0.5% gain across 11 midterm years, with gains in only 45% of them. The post-election record bulls cite looks very different once the last four midterms are included.
The Investor · Invest desk
Four figures. Fidelity: small caps averaged 31.2% from November of the midterm election year to the next October, and 13.5% over all of 1950-2009. Russell 2000 returned about -10% in the 2022-23 Nov-Oct window. Furey: midterm years finished higher 45% of the time.
| Figure | Value | Note | Claim |
|---|---|---|---|
| Small caps, Nov to next Oct after midterm vote, Fidelity avg | 31.2% | 7 | |
| Small caps, 1950-2009 avg | 13.5% (Fidelity) | 8 | |
| Russell 2000, 2022-23 Nov-Oct window | −10% about | one of four completed windows since 2009 | 4 |
| Furey midterm years higher | 45% of years | 1 |
What happened
- Eight of those 11 years produced negative or below-average returns, and small caps trailed large caps in the three most recent midterm years: 2014, 2018 and 2022.
- Fidelity's study of 15 midterm periods from 1950 through 2009 found small caps averaged 31.2% from November of the election year through the next October, against 23.4% for large caps.
- The Fidelity data ends in 2009, so it leaves out the last four midterm elections: 2010, 2014, 2018 and 2022.
- Furey names 1982, 2006 and 2010 as standout midterm years for small caps, each under a different monetary backdrop.
Why it matters
- constraint Furey's 0.5% and 45% cover whole calendar years, so they cannot say whether the weakness arrives before Election Day or after it. A weak year can still contain a strong rally once the vote is over.
- cost Small caps carry more floating-rate debt than large caps, so a higher policy rate feeds into their interest costs directly. Iaccino calls higher borrowing costs a headwind even for a healthy economy.
- decision An election result does not remove earnings, growth or borrowing risk. A decision to hold through the vote has to rest on those three, since the calendar no longer supplies the argument.
The first thing to do with the numbers in Bob Iaccino's Seeking Alpha piece is subtract [17]. The Russell 2000's 15.1% sits 14.6 points above Furey's 0.5% average [20], and for a full year to land on that average from here the index would have to fall about 12.7% [21]. That is an illustration, not a forecast (an average of 11 uneven years says little about the twelfth), but it shows how much a trader is assuming when the rally is simply extended.
The post-vote record is the strongest argument for holding through the election, and it rests on the oldest data. Fidelity's 31.2% post-election average sits 17.7 points above its own 13.5% all-period figure [8][22], or rather the Ibbotson Small Cap Stock Index's did, since that is what Fidelity measured and not the Russell 2000 [9]. Run the same November-to-October window on the Russell 2000 for the four midterms since and Iaccino gets +5%, -1%, +3% and -10% [4], a simple average of -0.75% [18] and about 32 points under Fidelity's number [19]. Iaccino wrote, "The old 31.2% average is a 1950-2009 number and is not what that same window delivered once this next era began." [5]
His explanation for the change is monetary. After 2008 the Fed was buying bonds, pinning longer-term yields and giving the market clarity through its 2% inflation target [24], and he offers reduced policy uncertainty as one possible reason small caps did better after elections [25]. The present Fed is hiking, with its latest decision a unanimous quarter-point increase to 3.75%-4.00% [10]. If policy clarity lifted small caps after elections, we think a hiking Fed is the weakest part of the bull case for repeating it.
Participation is the other thin spot. As of the September 22 close about 35% of the index's stocks were above their 50-day moving average and 54% above their 200-day [11], so 65% sat below the shorter average and 46% below the longer [23]. Iaccino wrote, "Breadth is improving, but broader participation would provide stronger support for the rally." [12]
The bull case, as Iaccino frames it, is that growth holds, earnings improve and the market gets comfortable with how much more tightening may be needed [27]. A second path is that midterm-year weakness and volatility give way to the stronger stretch after the vote that Fidelity's broader market research describes [15]. A third is that the last four post-vote windows repeat and small caps spend the year after the vote near zero [4]. Full-year losses of about 11% in 2018 and 20.4% in 2022 show the downside is on record [13].
We think the third deserves the most weight, because it is the only one measured on the Russell 2000 itself since 2009, though four observations are a thin sample [4]. A November-to-October return near Fidelity's 31.2% [7], or a rise in the 35% and 54% breadth readings before the vote [11], would prove that wrong. On that view, fresh capital does not chase the 15.1% [6], and the price of waiting is being underinvested if the older pattern returns.
What to watch
- Whether the Russell 2000's November-to-October return lands nearer Fidelity's 31.2% or the near-zero average of the last four midterm windows.
- Whether the share of index stocks above their 50-day average rises from about 35% before the vote.
- The Fed's next decision after the unanimous quarter-point hike to 3.75%-4.00%, and its effect on small-cap borrowing costs.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence55
- Adoption
- Insufficient
- Hype gap+5
- Incentives
- Insufficient
- Confidence55
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
Furey Research reviewed 11 midterm election years and found the Russell 2000 averaged a gain of just 0.5%, finishing higher only 45% of the time.
- [2]
Eight of those 11 years produced negative or below-average returns, and small caps underperformed large caps in the three most recent midterm years: 2014, 2018 and 2022.
- [3]
The Furey figures are full-year numbers and should not be framed as returns earned only before Election Day; a weak calendar year can still include a strong rally after the vote, and a year that finished positive can still have underperformed for much of the way there.
- [4]
Measured over the same November-to-October window with the Russell 2000, the four completed midterm stretches since 2009 (2010-11, 2014-15, 2018-19 and 2022-23) returned about +5%, -1%, +3% and -10%, for an average near zero.
- [5]
"The old 31.2% average is a 1950-2009 number and is not what that same window delivered once this next era began."
- [6]
The Russell 2000 was up roughly 15.1% year to date as small-cap traders headed into a midterm vote.
- [7]
In a Fidelity study covering 1950 through 2009, across 15 midterm periods small caps averaged 31.2% from November of the election year through the following October, versus 23.4% for large caps.
- [8]
Over the full 1950-2009 period, small caps averaged 13.5% in the Fidelity study.
- [9]
Fidelity used the Ibbotson Small Cap Stock Index, not the Russell 2000.
- [10]
The Fed's latest decision raised rates by a quarter point to 3.75%-4.00% in a unanimous vote.
- [11]
As of the September 22 close, only about 35% of the index's stocks were above their 50-day moving average and 54% above their 200-day.
- [12]
"Breadth is improving, but broader participation would provide stronger support for the rally."
- [13]
The Russell 2000's total return was approximately -11% in 2018 and -20.4% in 2022; those were full-year losses, not measures of what happened directly after the election.
- [14]
Standout midterm years for small caps include 1982, 2006 and 2010, with different monetary backdrops: rates fell sharply in 1982, the Fed finished its hiking cycle in 2006 and it announced a second round of quantitative easing in 2010.
- [15]
Broader market research from Fidelity finds a history of weaker returns and greater volatility in midterm years, followed by stronger performance afterward.
- [16]
The Fidelity data ends in 2009, which leaves out the last four midterm elections: 2010, 2014, 2018 and 2022.
- [17]
Bob Iaccino's Seeking Alpha article 'What Midterm Election History Says About Small Cap Performance' reports the Furey Research and Fidelity figures used here.
- [18]
The simple average of the four post-2009 Russell 2000 windows is about -0.75%.
- [19]
Fidelity's 31.2% post-election average is about 32 percentage points above the -0.75% average of the four post-2009 Russell 2000 windows.
- [20]
The Russell 2000's year-to-date gain is about 14.6 percentage points above Furey's 0.5% midterm-year average.
- [21]
For the full year to equal the 0.5% average from a 15.1% year-to-date gain, the index would have to fall about 12.7% from its current level (an illustration, not a forecast).
- [22]
Fidelity's 31.2% post-election small-cap average is 17.7 percentage points above its 13.5% all-period average.
- [23]
About 65% of the index's stocks were below their 50-day moving average and about 46% below their 200-day as of the September 22 close.
- [24]
After 2008 the Fed was buying bonds, pinning longer-term yields and giving the market clarity on policy direction via the 2% inflation target.
- [25]
Reduced policy uncertainty is one possible explanation for overall better small-cap performance after elections.
- [26]
Small caps have greater exposure to domestic revenue and floating-rate debt than large caps; a healthy US economy can support them even while higher borrowing costs create a headwind.
- [27]
The bull argument starts with growth holding up, earnings improving and the market becoming comfortable with how much additional tightening may be needed.
- [28]
Earnings, economic growth and borrowing conditions still matter, and an election result does not make those risks disappear.
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Sources
1 independent publisher whose own reporting we read for this story.
- seekingalpha.comWhat Midterm Election History Says About Small Cap Performance
1 article · October 12, 2026
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