Why Election-Year Drama Won't Slow Rising Stocks

The mood for the upcoming 2024 election can best be described as "dread"...

According to a recent Gallup poll, 6 in 10 Americans disapprove of President Joe Biden's performance. No incumbent has had a lower approval rating going into a reelection campaign since Dwight D. Eisenhower.

But Donald Trump is just as unpopular. Pew Research Center reports that 6 in 10 Americans view the former president negatively, too.

It's clear most Americans have a serious distaste for one or both candidates. That's a recipe for a brutal presidential race. So it's easy to assume this volatile political backdrop will spill over into the stock market.

But according to history, a presidential election – even an especially heated one – won't stop the current bull market...

Election Day is the biggest day in the political calendar. It decides the next four years of policy in the U.S...

But in terms of the stock market, it's more or less just another day. History shows election days don't make much difference to stocks.

To see this, I ran an "election simulator" to find how the S&P 500 Index performed on average in the first few weeks after an election.

The U.S. holds elections on the first Tuesday after a Monday in November. (That means if November starts on a Tuesday, polls won't open until the following week.)

Using this system, I tracked "election days" in nonelection years going back to 1950. Then, I found how stocks performed on average in the five weeks following these theoretical "election days."

Finally, I repeated this process during actual election years for comparison... And I found that stocks don't care whether folks are going to the polls or not. Take a look...

On average, stocks tend to rise through November. And they typically do so regardless of an election year...

Since 1950, we've had 18 years with elections and 56 years without. Stocks rose an average of 1.88% in the five weeks following a presidential election. That compares with a 2.37% increase during a nonelection year.

In other words, elections move the market less than half of a percentage point. History shows they simply don't cause much market volatility in the weeks that follow.

It's a contentious time in American politics. You may dislike one of the candidates in this year's election. Heck, you may even hate them...

But if that candidate wins, don't expect it to hamper the current bull run. Short-term political events don't dictate how stocks perform.

Rather than hedging your stock market bets against one candidate, stick to your investment strategy. Stocks should continue to perform well... regardless of who wins.

Good investing,

Sean Michael Cummings

Further Reading

Elections don't breed as much market volatility as people think. In fact, election years have proven to be reliably bullish periods for stocks. And history shows you should stay long regardless of the results... Learn more here.

"Investors can come up with any number of reasons to sell today," Brett Eversole writes. Yet stocks have kept climbing higher. It's better to harness the uptrend instead of fighting it – and you don't need to be an advanced market technician to do it... Read more here.

Market Notes

HIGHS AND LOWS

NEW HIGHS OF NOTE LAST WEEK

Bank of America (BAC)... financial giant
Brown & Brown (BRO)... insurance
Alphabet (GOOGL)... tech "World Dominator"
Microsoft (MSFT)... tech giant
Nvidia (NVDA)... chip giant
Texas Instruments (TXN)... semiconductors
Eli Lilly (LLY)... pharmaceuticals
Moderna (MRNA)... pharmaceuticals
Danaher (DHR)... science, health, and tech
Dell Technologies (DELL)... laptops and PCs
Netflix (NFLX)... video streaming
Costco Wholesale (COST)... membership-only stores
BJ's Wholesale Club (BJ)... bulk retailer
Colgate-Palmolive (CL)... household goods
Cintas (CTAS)... uniforms
Eaton (ETN)... power management
Johnson Controls (JCI)... industrial equipment
Trane Technologies (TT)... HVAC manufacturer
Motorola Solutions (MSI)... telecom
Suncor Energy (SU)... oil and gas

NEW LOWS OF NOTE LAST WEEK

Bristol-Myers Squibb (BMY)... pharmaceuticals
Walgreens Boots Alliance (WBA)... retail pharmacy
Lululemon Athletica (LULU)... athleisure wear
Five Below (FIVE)... discount retailer
Molson Coors Beverage (TAP)... beer

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