Following the conclusion of the first US election debate, Trump's chances of winning have sharply increased, with financial markets quickly reacting.

In fact, at the beginning of the year..."Advance Layout! Is the US stock market expected to unlock the election year in 2024?"It has been pointed out that, entering 2024, the US presidential election will be one of the focuses of overseas markets.

As the US presidential term enters the fourth year, it is a crucial year for the stock market. According to data dating back to 1928, the fourth year of the presidential term is one of the strongest-performing years for the stock market, with the median and average ROI of the S&P 500 index reaching 10.7% and 7.5% respectively, second only to the third year of the presidential term.

When is the best time to deploy during election year?

It is reported that one reason for the stable performance of the US presidential term in the fourth year is that the incumbent president will try to give the economy a final stimulus through fiscal expenditure to increase his chances of re-election.

Looking at the performance by month, Bank of America said that the average monthly ROI of the S&P 500 index during the fourth year of the presidential cycle shows that the performance is mediocre from January to May, rebounds in the summer from June to August, falls before the general election in September and October, and rebounds after the general election in November and December.

The strongest-performing month of the year is usually August, with an average increase of slightly over 3% and a success rate of 71%. Meanwhile, December is usually the month with the highest profit opportunities, with a success rate of 83% as the uncertainty of the presidential election subsides.

Interestingly, the US stock market has always been regarded as one of the important indicators for predicting the election results. Data shows that if the S&P 500 index rises in the period from August to October of election year, the incumbent president will be re-elected; if it falls, the competitor will enter the White House.

Which stocks might benefit?

Last week's first presidential candidate TV debate drew everyone's attention. As the election process progresses, the confrontation between incumbent President Biden and Republican challenger Trump will become more intense.

For some hedge funds that like to profit from trading violent fluctuations, Trump's temporary lead is pleasing to them, as his impromptu style and unpredictable policy positions often stimulate and boost market volatility.

At the same time, as the election continues to advance and enters a more intense debate phase, the market has also begun to make predictions about the impact of the election on the market and has started to price the election results.

Previously, Futu News'"Trump Battle Biden! The US election market is about to explode, which stocks are worth betting on?" article mentioned that UBS's analysts analyzed the policies of the past two US presidential terms and how they affected specific industries and companies, and compiled a list of "Biden Re-election Concept Stocks" and "Trump Victory Concept Stocks" for mooers to reference."Trump vs. Biden! The U.S. election situation is about to erupt, which stocks are worth betting on?"However, the analysts also warned that for stocks, policies are only one of the factors affecting trends. Each stock will still have other unique risks that may affect future performance.

In addition, Morgan Stanley stated that as the US election season approaches, investors should be more selective and focus on investing in high-quality stocks that usually have more stable returns, stronger balance sheets, and higher profit margins, while avoiding small-cap and cyclical stocks. This is mainly because they believe that if the Republican Party wins, immigration reforms and tariff issues may have a negative impact on economic growth. Considering inflation and fiscal sustainability, these dynamics may have an adverse effect on low-quality, cyclical, and small-cap stocks in the market.

In addition, Morgan Stanley stated that as the U.S. election season approaches, investors should be more discerning, focusing on investing in high-quality stocks that typically have more stable income, stronger balance sheets, and higher profit margins, while avoiding investing in small-cap and cyclical stocks. The main reason is that they believe that if the Republican Party wins, immigration reform and tariffs issues may have a negative impact on economic growth. Given inflation and fiscal sustainability, these dynamics may pose headwinds to the market's low quality, cyclical and small-cap stocks.

They believe that if the Republican Party wins, it may have a negative impact on economic growth due to immigration reform and tariffs issues. Considering inflation and fiscal sustainability, these dynamics may pose headwinds to low-quality, cyclical, and small-cap stocks in the market.

According to Nomura Research, in the 3-6 months before an election, the performance of high-quality stocks is usually about 4%-5% better than the market.

Editor/Somer