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Atlantic Edge Insights

June 2024

Market Insights

Stock Market Performance in Election Cycles

Despite the fearmongering of many political pundits on both sides of the aisle, the stock market is non-partisan. Over time, investment strategies that favor one party will lag an approach that remains invested over all periods. However, the stock market does respond to political themes and often follows a predictable pattern over the four-year election cycle (see graphic below for average stock performance over a 4-year Presidential cycle since 1900).
 

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  • The two strongest periods in the 4-year cycle coincide with the 12-month periods that begin around mid-term elections and the middle of the election year, which we are entering now.

 

  • While the midterm year coincides with expansionary fiscal policies to ensure that the economy is on solid ground heading into the election year, the period beginning in the middle of the election year through the first half of the post-election year has also been bullish for stocks, but for different reasons.

 

  • The timing of stock market rallies in the election year are impossible to predict, but generally follow a pattern. Stock prices often react negatively to uncertainty in general, and political uncertainty in particular. Using history as a guide, as the election draws closer and the outcome of the election appears more certain, stocks tend to rally. Once the election is over and uncertainty is removed, the rally continues.

 

  • In 2016, when the election outcome was in doubt and many predicted that the stock market was “rooting” for Hillary Clinton, the market was largely flat in the four months before the election, bottoming on November 4th, before rallying 35% in the next 15 months.

 

  • While polls remain close heading into the first debate in June, we expect that the market would react favorably if either presidential candidate gained a significant lead in the polls.

While 2024’s presidential election will likely be anything but dull, here are some other unique and interesting election year facts:

 

  • No U.S. President in modern history has ever been re-elected when a recession started in an election year.

 

  • Eight Presidents have died while in office.

 

  • James Monroe received every electoral vote except for one in the 1820 election, only because a New Hampshire delegate wanted George Washington to be the only president elected unanimously.

 

  • The U.S. Marine band has played at every presidential inauguration since 1801.

 

  • The Socialist Party of America candidate who famously said “Yours not to reason why. Yours but to do and die,” Eugene Debs, ran for president 5 times. The last time he ran, he conducted his campaign from a jail cell in the Atlanta Federal Penitentiary in 1920. He eventually lost to Warren G. Harding, who ended up commuting his sentence to time served in 1921.


Atlantic Edge Insights

Matthew Cochran, CFA
Robert Filosa, CFA
Ethan Caldarelli, CFA

 

Opinions expressed in this commentary may change as conditions warrant and are for informational purposes only. Information contained herein is not intended to be personal investment advice for any specific person for any particular purpose. We utilize information sources that we believe to be reliable but cannot guarantee the accuracy of those sources. Past performance is no guarantee of future performance; investing involves risk and may result in loss of capital. No graph, chart, formula or other device can, in and of itself, be used to determine which securities to buy or sell, or when to buy or sell such securities, or can assist persons in making those decisions. Consider seeking advice from a professional before implementing any investing strategy. 

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