October 29th, Caixin (edited by Ma Lan) – The US presidential election is also an important turning point for global financial markets. Due to the different political views of the candidates, the prospects for different financial assets and industries are completely different, making the market particularly sensitive in election years.

Even the A-shares have an alternative bet between Trump and Harris. Due to stock names implying Trump's victory,$Wisesoft Co.,Ltd. (002253.SZ)$today hit the limit up again; meanwhile, representing Harris,$ZheJiang Haers Vacuum Containers (002615.SZ)$the stock price dropped by 3.55% today. This has led many A-share investors to joke that the outcome of the US election is already very clear.

Since Harris took over from Biden, intense competition has led to continuous fluctuations in US stocks, cryptos, and the US dollar, leaving many investors feeling like they are on a roller coaster ride, dizzy and finding it even more difficult to see the way forward.

With the increasing popularity of Trump trade,$Bitcoin (BTC.CC)$,$USD (USDindex.FX)$,$XAU/USD (XAUUSD.CFD)$and as asset prices continue to rise, there is both optimistic sentiment towards Trump's victory and a need for hedging against his rise to power.

However, some doubt whether the election results will actually affect asset prices, especially in the US stock market.

Bank of America points out that in the medium to long term, the impact of election results on US stock performance is minimal, as market returns usually depend more on the economic and inflation situation rather than election outcomes.

Is the US stock market most fond of the 'lame duck'?

Bank of America stated in a recent report that it reviewed market data since 1948 and compared the stock market's roi in the 3 months after the election with data from other periods. Strategists found that the stock market performance is largely unrelated to the election results.

There are only three scenarios where the U.S. stocks' upward trend is influenced by politics. When Democrats take the White House and Republicans control the Congress entirely, or when the two parties form a split Congress, each holding an absolute majority in one house. In these cases, the U.S. stock roi tends to be higher than the long-term average roi.

Another possibility is when a Republican president is in office and the Democrats control Congress completely. In this scenario, the U.S. stock roi still shows positive results, but the upward trend is lower than the historical average level.

This report suggests that perhaps what the stock market would most prefer to see is the victory of a 'lame duck' president. Combining recent polls and this report from Bank of America, the most optimistic outcome of this year's election may be a victory for Kamala Harris, followed by Republican dominance in Congress.

Is red better, or is blue stronger?

Some institutions have also compiled statistics on the previous presidential elections since 1928.$S&P 500 Index (.SPX.US)$Changes, and finally found that only 4 times the index had a negative return rate in election years.

Image source: First Trust

Moreover, statistics show that when a Republican president wins, the average roi of the s&p 500 index reaches 15.3%; while when a Democratic president wins, the roi is only 7.6%.

This report is actually quite similar to the thoughts of Bank of America, which is that the results of the US presidential election most of the time do not affect the rise of the stock market. However, the report shows that there are differences in the stock market gains brought by different parties taking office.

This may also be related to the consistent 'small government' policy thinking of the Republican Party. When the party is in power, it usually believes more in market forces, has a more tolerant attitude towards industries such as finance, and helps boost investors' optimism.

This is also confirmed by the recent rise in the US stock market after Trump's significantly increased chances of winning. At least for now, Trump's 'iron-clad tax reduction policy' seems to be very attractive to the US stock market.

Does it matter to anyone?

Taking more recent data, if only the last ten elections since 1984 to 2020 are counted, except for the 2000 election, in the year following the other nine elections, $S&P 500 Index (.SPX.US)$Please use your Futubull account to access the feature.$Dow Jones Industrial Average (.DJI.US)$Please use your Futubull account to access the feature.$Nasdaq Composite Index (.IXIC.US)$And$Russell 2000 Index (.RUT.US)$All recorded positive returns.

Data source: Wind

Interestingly, over the past few decades, the stock market return rates one year after a Democratic president's election have generally outperformed those after a Republican president's election.

In the years when the Democratic Party won, the average return rate of the S&P 500 index was as high as 21.72%, the Nasdaq index return rate was 29.75%, and the Dow Jones rose by an average of 18.28%, far surpassing the average return rates brought by Republican presidents of 7.11%, 5.14%, and 9.37%.

Speaking of this, an unexpected outcome seems to have emerged: if investors buy US stocks on November 5th this year, follow the trend of the large caps, then hands off the stock trading software until next year, he will most likely be surprised to find that whether it's Trump or Harris taking office, he can see the successful outcome of trading stocks...

Editor/Rocky