Key Points
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The S&P 500 and Nasdaq Composite fell sharply on Thursday, with both indexes notching their largest single-day declines in market value on record.
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The S&P 500 just entered what has traditionally been its best six-month period of the four-year presidential cycle; history implies 19% upside by April.
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The Nasdaq Composite is now in correction territory, but the index will advance 21% over the next year if its performance matches the historical average.
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The U.S. stock market got hammered on Thursday, Nov. 5, as midterm election results cast doubts about how quickly the artificial intelligence boom will continue. The elections swept several governors into office who have vowed to restrict data center construction, while several congressional candidates skeptical of AI won seats in Washington.
The fallout was absolutely brutal for Wall Street, with the S&P 500 (SNPINDEX:^GSPC) and Nasdaq Composite (NASDAQINDEX:^IXIC) suffering their largest single-day declines in market capitalization on record. Specifically, the S&P 500 dropped 4.3%, erasing $2.9 trillion. And the Nasdaq Composite dropped 5.5%, erasing $2.5 trillion.
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The S&P 500 is now down 5.9% from its record high, and the Nasdaq Composite is down 11.9%, putting the technology-heavy index in correction territory. But history is clear about what comes next: The U.S. stock market has always recovered its losses, and there is no reason to expect a different outcome this time.
On the contrary, there are reasons to believe both indexes will rebound swiftly. Here’s what investors should know.
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History says the S&P 500 could advance 19% by May 2027
Historically, midterm election years have been difficult for the U.S. stock market. The party in the White House typically loses seats in Congress, creating political uncertainty that keeps many investors on the sidelines. Indeed, the Democrats gained at least 41 House seats and seven Senate seats during the latest round of midterms, according to The Wall Street Journal.
However, that political uncertainty tends to dissipate quickly once the ballots are counted, which often leads to big gains in the stock market. Since 1950, the S&P 500 has returned an average of 15% over the six months (November through April) following midterm elections, making it the strongest six-month period of the four-year presidential cycle, according to Carson Investment Research.
So what? The S&P 500 finished October at 7,580. History says the index will advance 15% to 8,717 by April 30, 2027. That implies about 19% upside from its current level of 7,353.
Investors can get exposure to the S&P 500 through the Vanguard S&P 500 ETF (NYSEMKT:VOO). And history suggests now is a good time to buy, not only because the index tends to perform well after midterms, but also because it’s currently 5% below its high. Under those circumstances, the S&P 500 has returned a median of 6% over the next three months, per Goldman Sachs.
History says the Nasdaq Composite could add 21% by November 2027
The Nasdaq Composite has entered stock market correction territory 10 times in the last decade, including the current downturn. That means corrections have occurred about once per year. But the index eventually recovered its losses after the previous nine corrections, and it often rebounded quickly.
Since 2016, the Nasdaq Composite has returned an average of 21% during the 12 months following its first close in correction territory. Investors need not go very far back to see this statistic in action. The index entered correction territory in March 2026, and it has already advanced 14% despite the recent drawdown.
Investors can get exposure to the Nasdaq Composite with the Fidelity Nasdaq Composite ETF (NASDAQ:ONEQ). But I prefer the Invesco QQQ Trust (NASDAQ:QQQ), an index fund that tracks the Nasdaq-100, a subset of the Nasdaq Composite comprising 100 large non-financial companies listed on the Nasdaq Stock Exchange.
Not only does the Invesco QQQ Trust have a lower expense ratio and greater liquidity, but also it gained 15.8% annually over the last 20 years, easily outperforming the Fidelity Nasdaq Composite ETF, which returned 13.6% annually over the same period.
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Trevor Jennewine has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Goldman Sachs Group and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
