Since 1945, the S&P 500 has risen in 73 per cent of the years where a Democrat was president and 70 per cent of the years when a Republican was the nation’s chief executive, according to Sam Stovall, chief investment strategist at CFRA.
The US stock market has tended to rise more in magnitude when Democrats have been president, in part because a loss under George W. Bush’s term hurt the Republican’s average. Bush took over as the dot-com bubble was deflating and exited office when the 2008 global financial crisis and Great Recession were devastating markets.
Besides who will be president, other questions hanging over the market include whether the White House will be working with a unified Congress or one split by political parties, as well as whether the results will be contested.
The general hope among investors is often for split control of the US government because that’s more likely to keep the status quo and avoid big changes that could drive the nation’s debt much, much higher.
As for a contested election, Wall Street has some precedent to look back to. In 2000, the S&P 500 dropped 5 per cent in about five weeks after Election Day before Al Gore conceded to George W. Bush. That, though, also happened during the near-halving of the S&P 500 from March 2000 to October 2002 as the dot-com bubble deflated.
Four years ago, the S&P 500 rose the day after polls closed, even though a winner wasn’t clear yet. And it kept going higher even after former President Donald Trump refused to concede and challenged the results, creating plenty of uncertainty. A large part of that rally was due to excitement about the potential for a vaccine for COVID-19, which had just shut down the global economy.
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The S&P 500 ended up rising 69.6 per cent from that Election Day in 2020 through Monday, following President Joe Biden’s win. It set its latest all-time high on October 18, as the US economy bounced back from the COVID-19 pandemic and managed to avoid a recession despite a jump in inflation.
In the prior four years, the S&P 500 rose 57.5 per cent from Election Day 2016 through Election Day 2020, in part because of cuts to tax rates signed by Trump.
Investors have already made moves in anticipation of a win by either Trump or Vice President Kamala Harris. The value of the Mexican peso might fall if Trump’s tariffs on Mexico come to fruition, for example.
But Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, suggests not getting caught up in the pre-election moves, or even those immediately after the polls close, “which we believe will face inevitable tempering, if not outright reversals, either before or after Inauguration Day.”
In the bond market, the yield on the 10-year Treasury rose to 4.34 per cent following Tuesday morning’s strong report on US services businesses from 4.29 per cent late Monday.
In stock markets abroad, indexes were mixed in Europe and Asia. The moves were mostly modest outside of jumps of 2.3 per cent in Shanghai and 2.1 per cent in Hong Kong.
AP
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