On November 6th local time, according to the latest data from APNEWS, Donald Trump has secured 277 electoral votes this time, becoming the first person in over 100 years since President Grover Cleveland to win a non-consecutive presidential term. With the presidential election results finalized, this has shifted many traders' attention to the potential market trends post-election.

So, how did the US market perform after every election day since the turn of the century? Deutsche Bank strategist Henry Allen has conducted a detailed analysis on this. According to his statistics, the post-election market responses varied greatly: in the six US elections since 2000, as of the end of November, the s&p 500 index has risen three times and fallen three times. The 10-year US treasury bond yield has fallen four times and risen twice.

The experiences of these post-election markets can be said to be quite different. For example, in 2008, the market was actually indifferent to the election result because Obama's victory was widely expected. In contrast, in 2016, Trump's unexpected victory caused a huge shock, leading to a sharp rise in US bond yields.

Of course, after the election, there are often other risk events that can impact the market, for instance, after the 2020 election, the stock market showed activity because pfizer announced the launch of a vaccine in the following week, providing support to the market under the pandemic. In 2012, concerns about the US fiscal cliff and the Greek sovereign crisis intensified, causing the market to struggle. In 2008, during the global financial crisis, the stock market also experienced a sharp decline.

Therefore, election results are not the only variable in post-election markets, just like this week people will also focus on the Fed decision on Thursday. This is something investors may need to consider in their trading this year...

2020 (Biden vs. Trump)

Post-election market characteristics: US stocks rose after the election because initially the Senate race in Georgia was undecided, leading to a divided government, and the vaccine news further boosted the market.

In 2020, the results on the night of the election were initially uncertain because Trump's performance temporarily exceeded the polls, and the gap between him and Biden was smaller than expected. However, it quickly became very clear that Biden's victory was imminent, even before the mainstream media officially announced his victory.

Initially, the market rebounded because it seemed there would be a divided government scenario, with Biden winning the presidency and the Republicans retaining the Senate. Control of the Senate at that time would depend on the two runoffs in Georgia in early January of the following year. Although the Democrats eventually won both runoffs and controlled the Senate, this was not the immediate expectation following the November election.

In fact, the rationale behind the market rebound at that time was that a divided government could be positive, as Republican control of the Senate would block tax increases and regulatory strengthening. While this scene also potentially meant reduced fiscal stimulus, the expectation of more accommodative action from the Federal Reserve still boosted liquidity trading.

The Monday after the 2020 election, Pfizer's vaccine announcement further boosted the market, followed by the successive release of other candidate vaccines. The vaccine's effectiveness data exceeded expectations, alleviating concerns that society might have to coexist with the new coronavirus in the long term, providing a path to return to normal life, hence risky assets performed well after the election. However, there were also other events related to the epidemic that occurred that year, which were the most important variables for the global economy at that time.

2016 (Trump vs. Clinton)

Post-election market features: Trump's unexpected victory led to a rapid rise in US bond yields.

In all elections since the 21st century, from market and political perspectives, the election result in 2016 was the most surprising because polling widely favored Hillary Clinton's victory, as did predictions and the gambling markets. In addition, the election result that year showed a Republican landslide victory in Congress, leading to a Republican wave—not just Trump winning the presidency.

With the Republican Party regaining power, the door to fiscal stimulus policies opened. Subsequently, the Tax Cuts and Jobs Act signed by the Trump administration in 2017 did achieve this goal - the act included reductions in income taxes and corporate taxes. The yield on US Treasury bonds soared after the 2016 election results were announced, as people had not fully priced in such an outcome beforehand.

During election week in 2016 (election day generally falls on Tuesday), the 10-year US Treasury bond yield rose by 20 basis points on Wednesday, another 9 basis points on Thursday, Friday was a holiday, and the following Monday saw an increase of 11 basis points. The continuous rise in US bond yields persisted until the end of the year, climbing from 1.85% on election night to 2.44% by the end of the year.

2012 (Obama vs. Romney)

Post-election market characteristics: Concerns about the fiscal cliff and the Eurozone debt crisis triggered risk aversion sentiment.

The outcome of the 2012 election was largely as expected, as people generally anticipated Obama's re-election, which was clear that night.

However, the market later exhibited a risk-averse trend. The s&p 500 index fell by 2.4% on the second day after the election, and another 1.2% on the third day. This was partly due to concerns about the so-called U.S. "fiscal cliff", the automatic deficit reduction mechanism, which would significantly slow down economic growth if government spending was abruptly reduced. In addition, the Republicans controlled the House of Representatives in this election, meaning the situation of a divided government would continue, requiring Obama to compromise with the Republicans to pass legislation. Therefore, there were concerns about whether the two parties could reach a compromise in a timely manner.

Part of the reason for this was the fear of the so-called U.S. "fiscal cliff", i.e., the initiation of automatic deficit reduction measures leading to a sudden decrease in government spending, which could result in a significant slowdown in economic growth. Furthermore, the Republicans controlled the House of Representatives in this election, meaning the situation of a divided government would continue, requiring Obama to compromise with the Republicans to pass legislation. Therefore, there were concerns about whether the two parties could reach a compromise in a timely manner.

In addition to the fiscal cliff, the situation in Greece was also highly anticipated that year. During the election week, the market was focused on when the EU would decide to release the latest bailout funds. Due to this uncertainty, the yield spread of Eurozone sovereign bonds widened - the difference between Italy's 10-year treasury notes yield and Germany's bond yield expanded by 7 basis points the day after the U.S. election, and by another 13 basis points on the third day. Therefore, the developments in Europe also dampened global risk appetite after the election that year.

2008 (Obama vs. McCain)

Post-election market characteristics: The market faced selling pressure after the election, but mainly due to the global financial crisis and extremely weak economic data, rather than the election results impact.

From a political perspective, Obama's victory in the 2008 election was the least surprising result in all U.S. presidential elections of the 21st century. Obama consistently led in opinion polls, and the final election results were quite disparate. In the electoral college vote, Obama led by 365 to 173, while also leading by 7 percentage points in the popular vote. From a market perspective, the election did not trigger significant direct reactions because Obama's victory had already been widely priced in.

However, the market did indeed experience significant selling pressure afterwards, as the election took place against the backdrop of the global financial crisis - at a time when the economy was still deteriorating. In fact, the s&p 500 index fell by 5.3% on the Wednesday after the election, as the ADP report showed an employment decline of -0.157 million in October (expected -0.102 million), and the ISM services index was at 44.4 (expected 47.0). Then on Thursday, the s&p 500 index fell by another 5.0%.

At this point, the overall environment had become extremely dire. Less than two months before the election, Lehman Brothers collapsed. On October 15th of that year, the s&p 500 index had its largest single-day decline since Black Monday in 1987 (-9.03%). Less than a week before election day on October 29th, the Federal Reserve once again lowered interest rates by 50 basis points to 1%.

2004 (Bush vs. Kerry)

Post-election market characteristics: With the continuation of policies in Bush's second term, the market experienced an increase.

From a political perspective, the election results in 2004 were quite close, with incumbent President George W. Bush winning only 286 electoral votes. This was the last time both candidates did not receive over 300 electoral votes. However, the election results largely matched expectations as polls had shown Bush leading in the months leading up to the election, especially in crucial battleground states like Ohio. This outcome meant Bush won a second presidential term, with the Republican party also controlling the House and Senate.

Following the announcement of the election results, the market rebounded strongly, with the S&P 500 index rising 1.1% on Wednesday of election week and 1.6% on Thursday. The market interpreted this as a sign of policy continuity, with taxes unlikely to increase during Bush's presidency. Strong post-election data further boosted this trend, with the ISM non-manufacturing report for Wednesday of election week at 59.8 (expected 58.0) and initial jobless claims on Thursday at 0.332 million (expected 0.34 million).

2000 (Bush vs. Gore)

Post-election market characteristics: Due to a month-long period of election uncertainty, the market exhibited a clear flight to safety.

This was an incredibly evenly matched and highly controversial election. The results depended on Florida, where both candidates needed to win to secure a majority in the Electoral College. On election night, the results in Florida were extremely close between Gore and Bush. Due to the outcome hinging on less than a 0.5% difference, the state had to undergo a machine recount. Gore's team also requested manual recounts of ballots from four counties in Florida, all located in Democratic-leaning areas.

In the following month, the Bush team attempted to stop the ongoing recount and the two sides engaged in a long legal battle. Although the ballots in Florida were certified on November 26th - Bush leading by 537 votes, Gore subsequently filed a lawsuit because some recount work had not been completed. Ultimately, the Florida Supreme Court sided with Gore, ordering a manual recount of undervotes, which are votes that were cast but not recorded by machines.

On December 9th, the US Supreme Court halted the manual recount, held a hearing, and ultimately ruled that the manual recount violated the 14th Amendment's guarantee of equal protection under the law, and that the recount could not meet the federal requirement of the 'safe harbor' deadline of December 12th, which states must determine their electors six days before the meeting of the electoral college.

After the Supreme Court's ruling, Gore officially conceded to Bush on December 13th, five weeks after the election day.

Amidst the massive uncertainty of the election results, the S&P 500 index dropped by 1.6% on the day after the election, and then further declined by 0.7% and 2.4% on Thursday and Friday. In fact, November 2000 was the worst performing month of the year for the S&P 500 index, falling by 8% from start to finish. As the US stock market declined, investors shifted to US treasuries, with the 10-year treasury notes yield dropping from 5.86% at the close of Election Day to 5.26% on December 13th when Gore officially conceded.

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