Can the Booming Stock Market Predict the 2024 Election Winner?
It’s a common topic of conversation in our client meeting rooms this year. Yes, the stock market is soaring in 2024, but what about the election? Will it impact the markets?
Historical Stock Market Returns in Election Years
Investors in the stock market like certainty. That’s hard to come by with anything in life, but especially elections. However, with Super Tuesday now in our rearview mirror, there is some certainty about the two major party nominees. President Biden and former President Trump are headed for a rematch of the 2020 election. Polls show another tight race.
Stock market history tells us that the market performs well in a Presidential election year, no matter who wins. Since 1952, the S&P 500 Index is up on average 7.3% in an election year, and the Index has been positive in 83% of those years.
First Quarter Swoon and Election Year Market Trends
Market history also tells us the low point of the year is usually in the first quarter, often in March. So, you could argue that the certainty of Super Tuesday helps markets go higher.
Take a look at this chart from LPL Research…
Incumbent Advantage and Super Tuesday Market Performance
Historical performance of the stock market does suggest that the incumbent may have an advantage, though.
Since the first occurrence of Super Tuesday in 1976, if the market was up year-to-date on Super Tuesday, the incumbent won re-election 4 out of 5 times. If it was lower on Super Tuesday, the incumbent lost in 6 out of 7 elections. You could argue here that if Americans feel pretty good about the economy, they will vote for the incumbent, but if they don’t, they won’t.
2024 Election: Market Reaction to Biden vs. Trump Odds
Finally, let’s get specific about THIS election.
LPL Research examined how the market has reacted to each candidate’s probability of winning…
The Key Takeaway: Align Investments with Data, Not Politics
What we can take away from this research is that just because it’s a Presidential election year, doesn’t mean the market will go down. In fact, there’s evidence to suggest the opposite.
And no matter who you are voting for in November, there’s no reason to align your investment strategy with your politics. Your financial plan should be based on facts, not feelings.
The opinions voiced in this video and blog are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
