Election Day Jitters: What’s Next for the Stock Market?
As the clock ticks down to Election Day, uncertainty reigns supreme. But amidst the chaos, market experts are sending a clear message: stay calm. History suggests that election years tend to bring strong returns, with U.S. stocks averaging a 9.1% increase over the past 74 years.
A Year of Gains
So far, 2022 has been a remarkable year for the stock market. The Dow Jones Industrial Average is up by over 11%, while the S&P 500 has surged 21% and the Nasdaq has skyrocketed 31%. According to Citi Research, years with large returns in the S&P 500 from January through October often deliver strong returns for the rest of the year – a trend that holds true during election years.
Candidate Impact
While each candidate has their unique strengths and weaknesses, their policies will undoubtedly shape the market’s trajectory. A Republican victory could benefit oil and gas companies, cryptocurrency, and bank stocks, as well as private prison operators. On the other hand, a win for Vice President Kamala Harris could boost companies focused on affordable housing, renewable energy, and artificial intelligence.
But There’s a Catch
For any of these plans to materialize, the winning party would need to gain unified control over Congress – a tall order. Historically, divided governments lead to watered-down initiatives and months of negotiations, ultimately resulting in gridlock. As Rob Haworth, senior director of investment strategy for U.S. Bank, notes, “It’s difficult for the most significant policy proposals to take effect without one-party control, and that’s when markets might become more reactive.”
Beyond Politics
Investors should also keep a close eye on other market-moving factors, such as earnings reports from companies like Walt Disney Co. and Lyft. Economic and inflation trends, which can be influenced by the administration in power, often have a greater impact on the market than party platforms.
Staying Ahead of the Game
As Naveen Malwal, institutional portfolio manager at Strategic Advisers, advises, “If you’re making investment decisions based on campaign proposals, that could be a risky way of managing one’s money.” Instead, focus on the bigger picture and stay informed about the latest news and trends shaping the market.
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