How might the Presidential Election in the USA affect stock markets? Jonathan Boyar, managing director at Boyar Asset Management in New York and Principal Advisor to the MAPFRE AM US Forgotten Value Fund, comments on the impact previous elections have had on the markets.
Investors are often wise to filter out most geopolitical noise when making investment decisions. But even as fundamentally long-term investors, we would be foolish to completely ignore history, which in Mark Twain’s words doesn’t repeat itself but often does rhyme.
With 2024 being a US presidential election year, geopolitics could very well drive the direction of the stock market in the short term, according to the Stock Trader’s Almanac:
- Presidential election years are the second-best performing years of the 4-year electoral cycle, having produced losses of greater than 5% in only 6 of the 32 election years since 1896. (But note that in 5 of those 6 years, the incumbent party lost power.)
- The stock market, as measured by the S&P 500, does better in years when a sitting president is running, with an average advance of 12.8% since 1949 (vs. an average loss of 1.5% with an open field).
- Regardless of which party wins the election, since 1950 the S&P has gained during the last 7 months of the election year in 16 of 18 presidential election cycles.
- When the S&P 500 is up from July 31 to October 31 during presidential election years, the incumbent party has retained power 85% of the time since 1936 but has lost control 89% of times when the S&P 500 has declined.
The 2024 presidential election promises to be anything but normal so history may be less instructive this time around. Instead, investors should focus on the companies they own, ideally over a time frame beyond the typical presidential term.
