Plotting all 35 midterm-election years for the DJIA since 1886, the spread of outcomes is enormous: In difficult midterm years, the DJIA has fallen by as much as 25% (1966), while in stronger years it has gained up to 45%. The average of ±2% is likely the most realistic expectation right now, given the current environment.
Chart 1: DJIA 2026 versus the Top Three Midterm Correlated Years:
1898 = approx. +20% (correlation 0.764); 1926 = ended the year flat (0.716); 1966 = approx. -20% (0.826).
However, to get a sharper view, the three midterm years with the highest correlation to 2026 DJIA performance (from January through last week) were selected and charted: 1966, 1926, and 1898 (Chart 1).
- 1966 has the strongest correlation (0.826).
- 1898 (0.764) is the bullish outlier: if 2026 follows that path, the market could go bazooka from here.
- 1926 (0.716) sits in the middle, and curiously, its path aligns with the average of the top three.
Chart 2: DJIA 2026 vs 1966 and Top Three Composites. In 1966, the DJIA printed its yearly low in early October.
Each of these years carries its own resonance:
- In 1898, the US was just emerging as a global power through victory in the Spanish-American War.
- In 1926, an industrial revolution was reshaping the economy.
- In 1966, tariffs, war, inflation, and a punishing midterm election defined the landscape.
Berkshire Hathaway's cash position has risen to a record above $370B, underscoring a scarcity of attractive valuations and ongoing reductions in holdings such as Apple. Warren Buffett has described recent market pullbacks as modest relative to historical downturns, drawing parallels to the elevated cash levels he maintained ahead of the 1999 dot-com crash and the 2007 financial crisis—periods when major equities ultimately fell by 80–90%.
See also: