The results of the presidential election may have less of an impact on Wall Street than is popularly imagined, according to a new study.
Published by the Minneapolis-based financial analysis firm Ameriprise Financial, the study contends that in all likelihood the market “can perform well through year-end whether Vice President Harris or former President Trump” prove triumphant on Tuesday.
Contending that “fundamental conditions in the U.S. are solid,” the study asserts that seasonal factors and historic trends favor a strong market, while just reaching the end of the balloting allows “investors to finally move on from the election.”
In so doing, those same investors could see “major equity averages press higher into the end of the year.”
The stock market would additionally be able to absorb the results of one party winning the White House and both houses of Congress, as well as handle a divided result. But what it won’t like, says the study, is a protracted vote count similar to what the country endured during the famous George Bush and Al Gore recount controversy in 2000.
That legendary 2000 recount saw the Standard & Poor’s average fall by 8% in the weeks following election day “as the final decision on who would sit in the White House remained uncertain.”
“A contested presidential election result that drags on for weeks would likely be a market negative temporarily,” says the study, with investors trying to “look through the dislocation” and putting “excess cash to work in stocks and bonds.”
According to data compiled by the network CNBC reaching back to 1980, the S&P has on average seen a less than 1% drop on the day after a presidential election, but has almost always witnessed a recovery one week later.
One time when that pattern did not play out: 2008, as Barack Obama won an election during the worst weeks of the Great Recession. The S&P was off 5.2% on the day after that election, and nearly 11% one week later.
One of the largest gains was recorded after Ronald Reagan’s 1980 victory, with the S&P up by 2.1% the day after and 1.7% one week later. Similarly, Joe Biden’s 2020 win saw a 2.2% next-day gain that grew to 5.2% a week later.
Overall, notes the publication Forbes, the markets have tended to perform better in the days and weeks before an election than after. But who ultimately wins a presidential election usually has a minimal impact on Wall Street, with returns tending to be positive over time, “regardless of who holds the office.”
November 5, 2024
By Garry Boulard
Photo Courtesy of Pixabay
