Investing.com -- Barclays told investors in a note on Wednesday that midterm election-related headwinds for U.S. equities tend to peak in late summer before giving way to a meaningful post-election recovery, with technology stocks historically among the biggest beneficiaries.

Analyst Venu Krishna stated that weaker S&P 500 returns in midterm election years are "a well-documented phenomenon," with underperformance versus non-midterm years most pronounced in August and September as "election-related uncertainty and risk premiums reach their maximum."

However, Krishna said the picture typically improves sharply after election day. "Following the election, risk-on sentiment tends to pick up materially, leading to better-than-average S&P 500 returns over the subsequent year."

Tech, Growth and Quality are "the most consistent leaders over this time frame, outperforming in all but one of the last nine midterm cycles."

Barclays believes the key driver is a reduction in policy uncertainty, noting that the year after midterms "averages the lowest economic policy uncertainty over the four-year Presidential term."

Tech stocks are described as "among the most reactive to a drop in policy uncertainty, particularly with regard to trade and national security given their global revenue footprint."

On the 2026 midterm outcome, Barclays’ base case is divided government, with a Republican president, Democratic House and Republican Senate, which the firm said would likely produce legislative gridlock and lower policy risk.

Krishna added that the firm remains constructive on U.S. equities, with the S&P 500 trading at approximately 20 times next-twelve-month EPS, "comfortably below two, three and five-year average multiples," and would view any near-term positioning unwind as "a buying opportunity, with a bias toward Tech."