What happens to the stock market after an election?
Jan 15, 2021 · After an election, stock market returns tend to be slightly lower for the following year, while bonds tend to outperform slightly after the election. It doesn’t seem to make much difference which party takes office, but it does matter whether control of the White House changes hands.
How do presidential elections affect your investment returns?
Mar 23, 2022 · According to market historian and stock trading author, Yale Hirsch, the stock market tends to be the weakest during the year following the election of a new president. ADVERTISEMENT This is followed by a recovery in the second year until it peaks in the third year, before falling in the fourth and final year of the presidential term.
How will the midterms affect the stock market?
STOCK MARKET PREDICTOR OF NEXT US PRESIDENT TOO CLOSE TO CALL According to data provided by YCharts, the Dow Jones Industrial Average has gained roughly 10% in the first year of a president's term...
Should you worry about market volatility during election season?
Mar 08, 2022 · Stocks tend to sell off ahead of the midterm elections. There is pronounced market volatility immediately before and after midterm elections. Stock markets tend to bounce higher in the two quarters...
Polls
According to the Financial Times state-by-state polling data [1], former vice-president Joe Biden, the Democratic party’s candidate, is polling ahead of incumbent Republican President Donald Trump in key battleground states. Biden and President Trump each need 270 electoral votes to win the presidency.
History
Reviewing the stock market performance in the months leading up to, during, and following presidential elections provides a helpful guide as to what we can potentially expect.
Charts
Major US equity benchmarks, as shown in figure B, staged an impressive recovery following steep market declines witnessed in March as COVID-19 fears gripped the country.
FP Markets
FP Markets is an Australian regulated broker established in 2005 offering access to Derivatives across Forex, Indices, Commodities, Stocks & Cryptocurrencies on consistently tighter spreads in unparalleled trading conditions.
Once election day is over, stocks are likely to jump -- regardless of which party wins
Will a Republican victory in the upcoming congressional elections help the stock market? Or will the market fare better if Democrats hold on to Congress and continue their much-criticized efforts to fix the struggling economy?
The presidential cycle
The "presidential cycle" historically has also been a good predictor of stock performance. The thinking is that presidents try to make tough economic decisions during the first two years of their tenure, and that often leads to lousy stock-market performance.
How often are elections held in the US?
US elections are held every four years and always on the first Tuesday after the first Monday in November. Electoral campaigns do not follow any official time frames and can vary in length. Still, this means US elections tend to be far more prolonged than other western democracies and can last for as long as 500 or even 600 days from start to finish. Below is a template provided by the US government that outlines the typical cycle of an election:
Who won the 2004 presidential election?
Bush won re-election after beating Democrat candidate John Kerry in the 2004 election. Bush’s popularity had strengthened in his first term as the economy began to recover and the country grieved after the 11 September attacks. The downturn in financial markets began to reverse in early 2003, when the S&P 500 picked up after two years of spiralling lower.
Trump VS Biden
Here’s a summary of Trump and Biden’s campaign themes, courtesy of MRB Partners Inc:
What the statistics suggest
As of 21 Oct 2020, the Polling Data shows that Biden has a 9-point lead, which is very significant.
What does this mean for investors?
If we experience a Blue Wave victory (i.e. scenario 4), the democrats are likely to implement public spending policies across various sectors quickly. Biden may also roll back corporate tax cuts that Trump has rolled out recently.
Which sectors could do well?
Looking at the Federal Budget Impact ( see budget plan image above ), you’ll notice that Biden intends to spend a significant amount on ‘Infrastructure and Other Domestic’ segments.
Conclusions on Short Term Market Movements
I believe that the market will be bullish as we go into the election and even after the election.
