We’ve entered the homestretch of Election 2024, and the polls in key battleground states continue to appear deadlocked. If things are truly as close as they seem, then it could make for a long week until all the votes are counted, and a winner is declared.
From an investor’s standpoint, when there’s this much potential uncertainty, we think that it makes sense to step back and re-focus on the fundamentals. On that note, in looking at how the market behaved following past elections, the data suggests that stocks weren’t overly concerned with which party was in the White House but rather how the economy performed afterward. Indeed, historically stocks did well over the following year whether a Democrat or Republican was in charge, as long as a recession didn’t occur. Currently, we believe that the economy remains on a path towards a soft landing and that recession risk remains low.
If there is some volatility this week as this all plays out, it wouldn’t be unusual based on previous election years. In examining how the market has performed in just the fourth quarter of election years versus all years, it shows that some selling typically occurred in the weeks leading up to election day (blue line trailing the orange line from beginning of Q4 through election week on 2nd chart). But once the uncertainty dissipates as the results come in, election year performance quickly starts to pick up with stocks rallying in the post-election period through year end, as they move more in line with their usual pattern during the strongest quarter of the year. After some pre-election jitters in the market last week, 2024 is now tracking much closer to the typical election year pattern coming into this week (dotted green line on chart).
So, despite all of the noise, we believe that investors will be well-served to keep these historical tendencies in mind.
Source: Bloomberg, CW Advisors, as of 11/1/24
Source: Bloomberg, CW Advisors, as of 11/1/24
Carl Noble, CFA
Senior Vice President of Investments
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