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Do Elections Affect the Stock Market?
rises (bull), and the Dow’s second-half return in election years is an average of 8.6% as opposed to 3% in other years.
BULLS, BEARS, AND BALLOTS — OH, MY!
So, based on history, the stock market usually performs weaker at the beginning of an election year due to economic uncertainty surrounding the candidate’s policies. As the year goes on and the parties solidify their plans throughout their campaigns, that ambiguity wanes, and the market picks back up. LOOKING TO THE FUTURE Investors are always trying to hedge their bets and plan for long-term economic downturns, another pattern worth looking into. According to T. Rowe Price, a global investment management firm, there’s a 22% probability of an election happening during a recession. What’s interesting, however, are the numbers in the years that follow. There’s a 57% chance the following 365 days will have a recession, with the second and third years coming in at 30% and 17%, respectively. The big question remains: Will the winner of this year’s race create an unstable market? Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management, says, “At the presidential level, the differences between the candidates, from an investor’s perspective, are not as significant as many would expect.” Change is constant in the markets, so don’t base your entire portfolio on this historical data. Trends like this are never guaranteed to repeat — they’re simply interesting patterns discerned in previous years. Instead, use this information to inspire your investments and empower yourself with clever strategies for cultivating long-term financial stability.
Decoding Election Year Stock Market Trends
Making money in the stock market can often evolve into a pattern recognition game, with investors searching for any repetition in past data. Many traders and analysts have noticed a particular market trend in election years — and some wonder what that means for 2024. Let’s look at the data gleaned from previous years and uncover how (if at all) it applies now. EMERGING PATTERNS A bull market is an economically stable time when prices are increasing. In contrast, a bear market is when stocks are losing value. Typically, stock market patterns in presidential election years show a weaker first half (bear), followed by a dip around May. After June, the index usually
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