The U.S. election has finally come to the "decisive moment," investors are not only concerned about who will eventually successfully enter the White House, but also want to know the future direction of financial assets, especially the U.S. stock market.

Let's start with the conclusion: Learning from history, the US stock market usually rises after the presidential election, but investors need to prepare for some short-term fluctuations first. Data compiled by CNBC shows that since 1980, from election day to the end of the presidential election year, all three major stock indexes have on average increased. However, investors should not expect the US stock market to rise in a straight line after the end of the voting.

Note: Performance of the S&P 500 and Dow Jones Industrial Average one day, one week, one month, and one year after past elections

In fact, these three indexes have shown average declines in the trading day and week following the election day. However, data shows that the US stock market often erases most or all losses within a month. This means that investors should not expect the US stock market to immediately rise on Wednesday or the following days.

Note: Performance of the Nasdaq one day, one week, one month, and one year after past elections

Delayed Election Results

Moreover, considering that the outcome of this election is very likely not to be announced on the election day or the next day, but may take a few days to reveal the results, this is particularly true.

Former President of the National Association of Secretaries of State, Trey Grayson, previously stated that after the voting on election day ends, the counting of votes across the country may vary: "We have 50 states, plus Washington, D.C., and our vote counting practices are almost all different."

Grayson suggested that this could mean that "in a very close election, we may almost certainly not know who the president will be, who will control the House of Representatives or the Senate on election night."

Amy Ho, Managing Director of Strategic Research at JPMorgan, stated, "The election is now the central stage for the next catalyst in the financial markets. We warn that the uncertainty of the election results may persist, as the presidential election may take several days to confirm the results, and the congressional election may take several weeks."

On November 5th, in addition to the 60th presidential election, the United States will also determine the composition of the 119th new Congress. This year, one-third of all 435 seats in the House of Representatives and 100 seats in the Senate will be up for reelection. The composition of Congress will have a significant impact on the governance of the next government, making this Congress election a focus of attention from all sectors.

Recent polling data indicates that the Republican Party is likely to win a majority of seats in the Senate in this turnover, while retaining control of the House of Representatives. This means that the worst-case scenario facing the Democratic Party is losing both the White House and Congress, with the best case scenario being Harris becoming a "lame duck" president.

US stocks welcome the "lame duck" president.

However, it seems that the "lame duck" president is not necessarily a bad thing for the US stocks. JPMorgan strategist Dubravko Lakos-Bujas expects that once the results of the US presidential election are announced, US stocks will rise in the final stages of 2024, especially in the event of a political deadlock.

"In any deadlock scenario, we believe that as uncertainty fades, volatility decreases, and hedge strategies are unwound, US stock prices will rise. At a time when the economy and corporate earnings remain resilient, investors will once again turn their focus to the Federal Reserve," he wrote in a report to clients on Monday.

Bank of America's previous research also found that the stock market may be most happy to see a "lame duck" president. The bank pointed out that when Democrats take over the White House, and Congress is completely controlled by Republicans, or when the two parties form a divided Congress, each occupying an absolute majority in one house. At this time, the return on USA stocks will show higher results than the long-term average return.

In addition, under the condition of a Republican president and Democratic full control of Congress, the return on USA stocks still shows positive results, although the upward trend is lower than the average level in the past.

US election is in a close race! How to track related concept stocks? Open Tuniu > US stocks.Investment themes> Quickly identify Donald Trump concept stocks / Kamala Harris concept stocks!

Editor/rice