Shifting Gears: Historical Data on Presidential Elections & Markets
CFA | SVP, Chief Investment Officer
1 Views on this market rally
Markets aren't the economy, and the economy isn't the market. While they're somewhat related, history has demonstrated that they aren't always in sync. Markets are a forward-looking, expectation-pricing mechanism. They bid themselves up or down in anticipation of what will come. The economy and most broad economic data tells us what has already occurred, not what is yet to come. Thus, it makes logical sense as to why they're so often dislocated.
2 What happens in markets leading up to and after presidential elections?
Historically, stocks have sold off ahead of the opposition party winning the presidential election, while it's been pretty much a straight shot up for markets when the incumbent wins. So what has historically happened to stocks after the dust settles? The first month after Election Day (i.e., much of November) tends to be bad regardless of which party wins. When the incumbent party loses, stocks have historically not only finished the year on a positive note, but the rally continued both 6 and 12 months post-election.
3 The S&P 500 could be a better indicator than the polls and pundits
If the S&P 500 is higher in the 3 months before the election (August 3rd through November 3rd), the incumbent has won. If stocks are lower in the 3-month period, the opposition has won.
Your investments in securities, annuities and insurance are not insured by the FDIC or any other federal government agency and may lose value. They are not a deposit or other obligation of, or guaranteed by any bank or bank affiliate and are subject to investment risks, including possible loss of the principal amount invested. Past performance does not guarantee future results.
First Citizens Wealth Management is a registered trademark of First Citizens BancShares, Inc. First Citizens Wealth Management products and services are offered by First-Citizens Bank & Trust Company, Member FDIC; First Citizens Investor Services, Inc., Member FINRA and SIPC, an SEC-registered broker-dealer and investment advisor; and First Citizens Asset Management, Inc., an SEC-registered investment advisor.
Brokerage and investment advisory services are offered through First Citizens Investor Services, Inc., Member FINRA and SIPC. First Citizens Asset Management, Inc. provides investment advisory services.
Bank deposit products are offered by First Citizens Bank, Member FDIC.