In the year following the drawn-out and often contentious 2020 election season, the S&P 500 has risen roughly 40%—the largest one-year gain following a presidential election compared with any time since at least the 1940s, according to CFRA Research. 

Of course, the stock market is not the economy. The U.S. is currently suffering from a dramatic worker shortage, inflation has lasted far longer at far higher levels than expected, and the COVID-19 pandemic lingers on—all of which has weighed on Biden’s standing with voters. Still, the steady hand of the White House, dramatically helped along by the Federal Reserve’s ongoing response to the pandemic, seems to have been a source of optimism for investors over the past year. 

“Markets have performed better than I think a lot of people had expected,” Ed Mills, a managing director at investment bank Raymond James, tells Fortune.  

Understanding why equities have gone on a tear over the past year requires looking back at investors’ mindset in 2020 during a time of great uncertainty. After all, it took days to call the race between Biden and then-President Donald Trump, thanks in large part to the influx of mail-in ballots from voters who exercised their civic duty from home. Even after the decision, the makeup of Congress was still undecided, though Republicans were widely expected to retain control in the Senate. And for those already on Capitol Hill, debate was still swirling about whether to issue more stimulus checks to combat the economic impact that the pandemic had brought, which included a 6.7% unemployment rate in November 2020. Meanwhile, COVID-19 was still raging in the U.S. with no available vaccine.  

Then, in what seemed like a one-two punch of good news for investors looking for more stability, the Associated Press finally determined on Nov. 7, 2020, that Biden had won. And just a couple of days later, with U.S. futures beginning to trade for the first time since the election had been called, Pfizer and BioNTech revealed the early results of their COVID-19 vaccine’s final trial phase: It could prevent more than 90% of infections from a virus that had already claimed hundreds of thousands of lives.  

The S&P 500 promptly took off—officially beginning the Biden bounce that has lasted throughout the transition period between administrations, Democrats taking the Senate, an insurrection attempt, meme stocks, and more.

“People were feeling optimistic that because of a majority in both houses of Congress, albeit a very narrow one in the Senate, that things could get done,” CFRA Research chief investment strategist Sam Stovall tells Fortune. “Just like with almost every first-year president, there is a lot of anticipation [and] optimism that good things come with change.”

But what has happened to the stock market since cannot be solely attributed to the president. 

The White House has had its victories, including its rapid and comprehensive response to COVID-19 and the newly passed bipartisan infrastructure bill. However, infighting among moderate and liberal Democrats has slowed Biden’s “human infrastructure” plans, which have centered around education, paid leave, and childcare, and has caused some of the administration’s other ambitions to be stuck in a logjam.

Instead, it is the Fed—with its rock-bottom interest rates and billions of dollars’ worth of monthly bond purchases—that has helped drive stock prices higher, with companies loading up on debt and investors feeling empowered to make tremendous bets in the markets. 

“Really, the credit for this market’s advance goes to the Fed,” Stovall says.

Will there be a sophomore slump?

How stocks behave in year two of Biden’s presidency may be an entirely different story, though.

The S&P 500 has historically suffered its roughest stretches during a president’s second year in office, according to CFRA Research. Behind the decline is usually a rising sense of uncertainty about what’s to come in the midterm elections, Stovall says.

Adding to the uncertainty is a lack of clarity around what the Fed will do about inflation.

The central bank kicked off November announcing that it would soon begin tapering its bond purchases to curb inflation, but it was quickly upstaged by the consumer price index’s highest reading in three decades. Fed Chair Jerome Powell has said the central bank may consider accelerating its tapering timeline (currently slated to end by the middle of 2022), but has stuck by the assertion that the labor market dynamics need to improve for the Fed to consider raising interest rates.

“In many ways, a year into President Biden’s term, this is still a conversation of fiscal and monetary policy, as well as where COVID is in our recovery,” Mills says.

The 2022 elections will ultimately be pivotal to how much Biden is able to get done in the second half of his first term, and a GOP-controlled Congress will stymie many of the administration’s most ambitious plans in hopes of laying the groundwork for the Republicans to take back the White House. 

For investors, though, the end of the midterms is bound to be more welcome news than whichever party comes out on top. On average, the S&P 500 has gained 3% in the third quarter of a president’s second year in office and another 5.2% in the final quarter of the year.

“It’s like a corralled bull,” Stovall says of the S&P 500 ahead of midterms. “It’s able to charge forward, once the gate of uncertainty is removed.”

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