Insights for Investors on the 2024 Presidential Election
With the first quarter of 2024 in the books, the headlines surrounding this year's upcoming election will only grow louder. Elections, especially recent ones, tend to bring out a lot of emotion and speculation. While we all have our own opinions and perspectives, the intent of this article is not to provide any political commentary, but simply to zoom out, and look at how election years typically impact the stock market.
Election results can impact government and economic policy, laws, and foreign relations, but what does that mean for you as an investor? Historically, election outcomes have had varied impacts on market performance, with factors such as economic trends often exerting a stronger influence. Here's a breakdown of key points and possible scenarios for the 2024 presidential election and its potential impact on the market:*
1. Historical Trends: Analysis of market data since 1948 has shown that there hasn't been a statistically significant relationship between single-party control of both the White House and Congress and market performance. Instead, certain divided-government scenarios have demonstrated relationships with market performance. For instance:
○ Democratic control of the White House and full Republican control of Congress.
Historically results in above average returns
○ Democratic control of the White House and split party control of Congress.
Historically results in above average returns
○ Republican control of the White House and full Democratic control of Congress.
Historically results in below average returns
These scenarios have shown varied impacts on market returns, but they are generally not significantly disruptive.
2. Economic and Inflation Trends: Economic growth and inflation trends tend to have a more consistent and stronger relationship with market returns compared to election outcomes. Rising economic growth and falling inflation typically correlate with returns above long-term averages, while falling growth and rising inflation correlate with positive but below-average returns.
3. Midterm Election Years: In midterm election years, the S&P 500 has consistently outperformed in the year following midterms compared to non-midterm years. Again, party control of Congress generally isn't a major factor in projecting overall equity market performance during midterm years.
4. Potential Market Sector Impacts: While elections may not have a significant medium-to-long-term impact on overall market performance, they can influence individual sectors and industries based on proposed policies, regulations, or global conflicts. Some key policy issues we are monitoring during election cycles include:
○ Tax policies for individuals and corporations.
○ Spending priorities such as infrastructure, defense, and healthcare.
○ Regulations affecting various industries.
○ Immigration policies.
○ International trade relations and geopolitical conflicts.
We will be keeping an eye on the composition and control of Congress resulting from the 2024 election, as well as potential policy changes that could affect specific sectors. Despite the attention on elections, our team’s priority is to maintain focus on fundamental factors such as economic growth, interest rates, inflation, and corporate earnings when making portfolio decisions.
Overall, while elections can introduce short-term volatility and uncertainty, long-term market performance is more significantly influenced by broader economic trends and corporate fundamentals. Investors should remain cautious of overreacting to election-related news and focus on maintaining a well-diversified portfolio aligned with their long-term financial goals.
Key points
● With primaries and caucuses now complete in most states, the major party’s 2024 candidates appear set.
● President Joe Biden and former President Donald Trump are on track to accept their respective party’s nomination this summer.
● It’s important to maintain a proper perspective when assessing the potential impact elections can have on capital markets and your investments.
● Democrats are increasingly favored to retake the House in the Nov. elections, but it is possible the party will gain control of the chamber before this fall as the GOP majority shrinks because of early retirements and special election losses.
● Republicans now hold a slim 218-213 House majority (a narrow GOP majority does not guarantee control of the chamber).
* Facts in points 1, 2, and 3 sourced from U.S. Bank Wealth Management “How presidential elections affect the stock market”.
Investment advice is offered through Belpointe Asset Management, LLC. 500 Damonte Ranch Parkway, Building 700, Unit 700, Reno, NV 89521. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.