September carries a historically difficult reputation for financial markets during US midterm election years. Analysis of 10 midterm cycles between 1986 and 2022 shows that stock markets experienced significant declines in every instance, with average lows arriving on September 2 and representing a 16.77% drop from yearly highs.
The severity of these declines has varied considerably. In 2002, stocks fell 33.75% from their highs, while 2014 saw the smallest drawdown at 7.40%. The timing of these lows also differed substantially across the 10-year periods studied.
Bitcoin currently trades near $77,500, with US stocks near record highs and long-term bond yields remaining elevated. So far in 2026, markets have not followed the traditional midterm pattern.
Fed Signals Continued Focus on Inflation Control
Recent comments from Federal Reserve Chair Kevin Warsh indicate the central bank remains committed to inflation control rather than rate reductions. Warsh highlighted that the PCE price index rose 3.7% over 12 months, with the six-month pace accelerating to 4.1%.
Bond markets reflect this outlook, with 30-year Treasury yields recently trading at 5.20%, significantly higher than the effective fed funds rate of 3.63%. Fed presidents voted for a rate hike in July, and traders now assess September rate hike odds at 53% versus 48% for a hold.
Bitcoin's Recent Rally Meets Resistance
Bitcoin recently recorded its largest weekly dollar gain, adding $14,775 as spot ETF buying reached its fastest pace since October 2025. However, the rally stalled near the $80,000 level. Bitcoin currently trades 37% below its October 2025 peak of $126,080.
Historical precedent raises caution: during the Fed's last tightening cycle in 2022, Bitcoin declined approximately 65% to a $15,500 low in November. Market technicians note that current S&P 500 support levels could affect broader risk appetite if breached.
Historical data shows that across the 10 completed midterm election cycles studied, the S&P 500 gained an average 27.80% in the year following market lows, though markets typically experienced declines before reaching those lows.
