Historically, the US stock market tends to rise after presidential elections, but investors should be prepared for some short-term volatility first.
According to Zhītōng Finance, historically, the US stock market typically rises after presidential elections, but investors should first prepare for some short-term fluctuations. Data shows that since 1980, from Election Day to the end of the presidential election year, the three major US stock indexes have all experienced gains. However, investors should not expect the stock market to rise in a straight line after the election.
Looking further ahead, election years are generally favorable for the US stock market. Since 1960, the S&P 500 index has risen in almost every election year. The only exceptions were in 2000 and 2008, which saw significant declines due to the bursting of the internet bubble and the financial crisis, respectively. In the most recent election cycles, this track record looks even better. In the three election years since 2008 - 2012, 2016, and 2020 - this benchmark index has risen by at least 10%.
From a narrower perspective, focusing only on the last seven months of election years yields similar results. According to data and analysis from the Stock Trader's Almanac, since 1950, out of 18 US presidential elections, the S&P 500 index has risen during this period 16 times. 2000 was a low year, and the other was 2008.
In fact, the three major stock indexes have shown average declines in the trading day and week following the election day. Data shows that the stock market often erases most or all losses within a month. This means that investors should not expect an immediate rise in the stock market this Wednesday or in the following days.
Given the intense situation with the two equally matched candidates in this US election, the results may not be announced until Wednesday morning. So the market may still need to wait for the evenly divided congressional elections to determine which party controls the final vote count in both houses.
JPMorgan's global strategy research managing director, Amy Ho, said: "The election is now a central factor in the financial markets' next catalyst. We warn that the uncertainty of the election results may persist, as it may take several days to confirm the election results for the presidential campaign and several weeks for the House elections."
This election is taking place during a strong year for the US stock market, pushing the large cap to historical highs. According to data from Bespoke Investment Group, the first 10 months of 2024 have been the best performing year of a presidential election year since 1936, with gains of around 20%.
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