Marc Cuniberti Discussions about what will happen to the markets because of the fall presidential elections run the gamut from all out Armageddon to having no effect.
Personally I think the nation will again be torn asunder if it turns out Trump takes on Biden. What that does to the markets, surprisingly, may be anti-climactic. Markets sometimes are affected by things we think should have little effect, while other earth shaking events turn out to move the markets not.
In my opinion, as it is said markets always look ahead half a year or so as to what is coming, what happens to the markets will likely happen before the November voting date.
Polls will certainly forecast who is in the lead and likely to win but if the previous Trump election is any indication, a close race will bring up memory of the Trump surprise and it may indeed come down to the wire.
A Trump win will likely be positive for markets if history is any indication. His last victory started the market out on an historic 3 year run with an approximate 37% increase. A Biden election might also run the markets, giving a sense of stability to the nation instead of the turbulence a Trump presidency might bring.
Indeed, I wouldn’t bet either way, as most times it seems Mr. Market has a mind of its own. There are so many variables between now and November that forecasting what will happen no matter who wins is a crapshoot at best.
The “election year cycle” theory is a study of market direction based on what year in an election cycle the market is currently in, meaning how the market reacts every fourth year and how it reacts the other three years that no presidential election is held.
Since 2024 is an election year, it’s the fourth year of the election cycle. Going back over 50 years, a 7.5%-8 % annual average increase marks the fourth year cycle. The third year holds the record out of the four year cycle for the best years for the market.
Regardless of whether a republican or a democrat gets elected, no one can predict with certainty what will happen. Markets are like that. But history does have its say.
Based on an annual average stock market return, a democratic President on average yields a 1.5% better market performance then a GOP president.
Governmental power is not solely concentrated with the President however.
When the senate is run by democrats the market yields an average of 6.3% while a Republican senate returns an annual average of 11.3%. The same holds true for a Republican held house which yields 10.7% versus a 7% annual increase when held by Democrats. Interestingly enough, the market does best when there is a split Congress.
It is assumed the resulting gridlock from a split in Congress is the best scenario, at least for the markets. One could draw the conclusion from that odd statistic that the market likes less rather than more when it comes to new regulations.
In conclusion, as we get closer to the fall election, I can only say “here we go again”, and pray we are bit gentler on each other this time around.
This article expresses the opinions of Marc Cuniberti and are opinions only and should not be construed or acted upon as individual investment advice nor the opinions of this media outlet, its staff, members or underwriters nor any bank, investment firm or RIA. His website is www.moneymanagementradio.com. Marc holds a B.A. in economics, 1979, with honors. California Insurance License # OL34249. No one can predict market movements at any time. Investing involves risk and you can lose money. Consult a qualified financial professional before making any investment decisions and do your own research before investing.
