Election Day Jitters: A Historical Perspective on Market Performance
As the nation prepares to head to the polls, investors are naturally wondering how the outcome will impact the stock market. Despite the uncertainty, history suggests that election days are not typically a harbinger of doom for the markets.
A Surprisingly Resilient Market
Since 1980, the S&P 500 has risen on 8 out of 10 election days when the market was open. When considering both the day of and the day after the election, the index has been more volatile, falling half of the time. However, this short-term turbulence belies a more encouraging trend: the S&P 500 has averaged a 10.68% return in the year following elections dating back to 1960, in line with its standard average return.
Long-Term Focus
While elections can bring short-term market fluctuations, they rarely disrupt the long-term trend. As RBC Capital Markets’ Lori Calvasina notes, “Elections usually spark short-term repricings, [but] the S&P 500 tends to post gains in all balance-of-power scenarios.” The key question remains what any risk could mean for future company earnings, rather than getting bogged down in election-day jitters.
Gridlock: A Friend to Investors?
Typically, a split-party government results in fewer sweeping changes, creating an ideal backdrop for stocks. As Oppenheimer’s John Stoltzfus explains, “Checks and balances… often have served in the past… to protect what investors care most about — a healthy economy for consumers and for revenue and profit growth for business.”
Presidential Cycles: A Historical Analysis
Research from Truist’s Keith Lerner reveals that the S&P 500 grew at an annualized rate of 13% from President Obama’s election to President Trump’s, and 14% from Trump’s win to Biden’s. Since Biden’s election, the index has averaged a 16% annual return. Information Technology has consistently been a top-performing sector across these regimes, likely due to its strong earnings growth.
The Tech Bull Market Persists
Regardless of who occupies the White House, the tech sector’s upward trend has remained resilient. As Baird’s Michael Antonelli aptly puts it, “The reason the stock market goes up over time [is] that the people that work at the companies go to work, make products and services, and shareholders get to benefit from that.” In other words, the underlying drivers of the stock market will continue to propel it forward, regardless of the election outcome.
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