2024 US Presidential Election: The 2024 US presidential election has reached its final day as billions of Americans cast their votes to choose their preferred president to lead the world’s largest economy for the next four years. Vice President and Democratic candidate Kamala Harris and former President and Republican candidate Donald Trump continue to compete for the White House in national polls and in key battleground states.
As election momentum builds, investors are assuming that heightened sentiment and uncertainty around poll results can have a significant impact on market sentiment and performance. Historical data shows that the S&P 500 index rose 1% to 2% on the day the results of the U.S. presidential election were announced, regardless of whether the White House was in blue or red. The performance of the U.S. stock market indexes, the S&P 500, the Dow Jones Industrial Average, and the tech-heavy Nasdaq, during election periods is affected by policy and economic stimulus measures.
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Looking at the past five elections, the U.S. stock market has tended to rise after the results. Increased volatility was observed in the period leading up to the election. The US stock market has performed well for a long time under Democratic and Republican leadership. But five years of data reveal market returns favoring Democrats.
US Presidential Poll: Who won and who lost in the last five years?
2020 US presidential election: The Democratic ticket of former Vice President Joe Biden and young California senator Kamala Harris defeated incumbent Republican President Donald Trump and Vice President Mike Pence. This election had the highest turnout since 1900. Joe Biden received more than 81 million votes, the most votes ever cast for a candidate in a US presidential election.
2016 US Presidential Election: Businessman Donald Trump and Indiana Governor Mike Pence’s Republican ticket is expected to be the biggest yet, with former Secretary of State and first lady Hillary Clinton and Virginia junior senator Tim Kaine He tore up his Democratic Party ticket. Political turmoil in American history.
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2012 US Presidential Election: Incumbent Democratic President Barack Obama and his running mate, incumbent Vice President Joe Biden, are elected to a second term. They defeated Republican candidates former Massachusetts Governor Mitt Romney and Wisconsin Representative Paul Ryan.
2008 US presidential election: Junior senator Barack Obama of Illinois and senior senator Joe Biden of Delaware vote for the Democratic nomination, while senior senator John McCain of Arizona and Sarah Palin vote for the Democratic nomination. He defeated the Republican candidate for governor. Alaska. Obama became the first African American to be elected president, and the third sitting U.S. senator to be elected president, following Warren G. Harding and John F. Kennedy.
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2004 U.S. Presidential Election: Incumbent President George W. Bush and his running mate, incumbent Vice President Dick Cheney, are re-elected to a second term on the Republican ticket. They narrowly defeated the Democratic ticket of Sen. John Kerry of Massachusetts and his running mate, Sen. John Edwards of North Carolina.
US Presidential Poll: Impact on US Stock Market
Let’s take a look at the trends in the US stock market during the past five US presidential elections.
Investors can be nervous during election years, concerned about how the outcome of the election will affect their investment portfolios. Some may consider hitting the pause button on investing altogether to avoid uncertainty. But historical data shows that markets don’t pick political favorites. The Nasdaq performs well in election years, especially when the policy direction is clear after the election.
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Historically, markets have performed well after elections under Democratic presidents, as seen with Biden in 2020 and Obama in 2012. Although these gains are driven by broader economic factors (such as recovery from recession), they are often driven by expectations for economic recovery and stimulus. Major Contributor.
“Markets have also reacted positively to Republican victories. For example, President Trump’s victory in 2016 led to a sharp rally as markets expected business-friendly policies, while President Bush’s reelection in 2004 brought stability during the Iraq War,” said Sujit Modi, CIO of Share.Market.
US stock market during the 2020 and 2016 elections:
Due to the 2020 election, the Dow Jones Industrial Average (DJIA) index ended early October 2020 at approximately 28,000 points. After the election, the DJIA initially soared, closing above 30,000 points for the first time in late November 2020. This is due to optimism regarding vaccine development and expectations for additional fiscal stimulus under the Biden administration.
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The Nasdaq index shows a similar trend. Leading up to the election, the index experienced considerable volatility. In early October 2020, it was around 11,000 points. After the election, the Nasdaq rebounded sharply. In late November 2020, it exceeded 12,000 points.
“From early October 2020 to March 2021, the index registered an increase of approximately 15 percent. This increase was driven by the solid performance of technology stocks, particularly as remote work and digital services surged during the pandemic. He was liked for this,” Sujit Modi added.
Despite changes in political parties and various political events, the market has maintained its long-term upward trajectory, demonstrating resilience to short-term political changes. Notably, when analyzing recent administrations, the performance of the S&P 500 index during Trump and Biden’s terms was nearly identical.
During President Donald Trump’s administration, the S&P 500 returned 61.54%, according to Bloomberg data. During President Joe Biden’s term (ending September 1, 2024), the index returned 62.84%.
The 1,455-day S&P 500 return during Donald Trump’s presidential term was measured from November 9, 2016 to November 3, 2020. Joe Biden’s presidential term returns are tracked from November 4, 2020 to September 1, 20024 (Source: Bloomberg)
In which election did the U.S. stock market rise the most?
The highest election day increase in the last five US presidential elections was 4.08%, when Barack Obama was elected the first African-American US president at the height of the global financial crisis in 2007/08. It was.
“Due to the closeness of the U.S. presidential election, some investors may not know the actual results on election night and wonder who won, while Florida’s electors are still undecided,” Prashant said. “We are preparing for a situation similar to 2000, when there was uncertainty.” Mr. Tandon, Executive Director, Investment Advisors, Waterfield Advisors.
How will the US stock market react on election results day?
On results day, S&P 500 returns remain weak, ranging from -0.7% (2000 and 1992 election result days) to 1.4% (2020 result day), with an average return of 0.8 percent , the standard deviation is 1.2 percent. On U.S. election results day, the S&P 500 always ended in the green.
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“This results in a return range for the S&P 500 of -0.4% to 2.0%.The average performance of other major indexes, such as the Dow Jones and Nasdaq Composite, was also relatively flat, rising 1.0% and 0.3%. cents each,” said Manish Jain, director, institutional business (equities and finance) at Mirae Asset Capital Markets.
How have the U.S. stock market returned over the past four elections?
Given the average performance of stock market returns over the past four years (post-election results) under Democrats and Republicans across all three indexes, historical data favors Democrats.
According to Manish Jain of Mille Asset Capital Markets, the four-year average return for the Nasdaq under Democratic presidents was 98.3%, 60.7 percentage points higher than under Republican presidents. The average four-year return for the S&P 500 was 29.8% under Republican administrations, compared to 57.1% under Democratic administrations.
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Following the election results, the S&P 500 index is likely to see slower returns over the next three months. However, market performance has generally improved, with six-month average returns of around 5.2%, while three-month average returns of around 2.0%.
When the incumbent party loses, market returns tend to be lower, with the S&P 500 index dropping an average of 0.6% and 1.4% over the next one and three months, respectively. Returns typically turn positive over the next six to 12 months, but they tend to be lower than they would be if the incumbent party won. Historical trends show that incumbent parties are more likely to lose when elections are held during or after a recession.
What impact did the US presidential election have on the Indian stock market?
Due to economic cooperation between the US and India, the US presidential election also tends to affect the Indian stock market. Historically, Indian markets have experienced fluctuations based on election results.
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In 2008, during the financial crisis, the Sensex was in decline, but it recovered slightly due to optimism about President Obama’s stimulus plan for the US economy. After President Obama’s re-election in 2012, the market welcomed the continuation of the policy, and the Sensex index rose slightly by 0.58%.
President Trump’s victory in 2016 caused an initial drop of 1.75%, reflecting uncertainty over trade policy, but the market quickly rebounded. On the other hand, if Biden were to win in 2020, the Sensex index would have risen by 2%, driven by hopes of stable trade relations.
Sujit Modi, CIO at Share.Market, said that while elections cause short-term moves, broader economic conditions, such as the 2008 financial crisis and the 2020 pandemic, are more important than political outcomes alone. This tends to have a significant impact on performance.
Disclaimer: The views and recommendations provided in this analysis are those of the individual analysts or brokerage firms and not of Mint. Because market conditions can change rapidly and individual circumstances may vary, investors are strongly encouraged to consult a certified professional before making any investment decisions.
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