With the presidential election looming, investors are gearing up for potential market fluctuations in the coming weeks. Historically, stocks have shown a tendency to rise between Election Day and the end of the year after presidential elections since 1980. However, the immediate aftermath of the election can be marked by short-term choppiness in the market.
Data from CNBC shows that the S&P 500, Dow, and Nasdaq Composite have all experienced average declines in the session and week following past voting days. Despite this initial dip, stocks have typically rebounded within a month, erasing most or all of the losses incurred post-election.
Investors should not anticipate an immediate surge in the market on Wednesday or in the days following the election. The outcome of the presidential race, which is currently neck-and-neck, may not be determined quickly, potentially leading to uncertainty in the markets. Additionally, final counts for close Congressional races will be needed to ascertain which party will control either house.
Amy Ho, executive director of strategic research at JPMorgan, highlights the election as a key catalyst for financial markets. The timeline for certifying election results could lead to lingering uncertainty, particularly in the presidential race and House races.
Despite the potential for short-term volatility, 2024 has been a strong year for stocks, with the broader market reaching all-time highs. The year has seen the best first 10 months of a presidential election year since 1936, according to Bespoke Investment Group. As investors navigate the post-election landscape, they should be prepared for potential market fluctuations while keeping an eye on the broader economic and political factors at play.