Introduction
With the U.S. presidential election just a few months away, many of our clients are asking: What’s going to happen with the market after the election this year? Let’s dive into historical data and trends to shed some light on this question.
Historical Market Performance
Our research partners have provided us with a comprehensive analysis of how the stock market has historically reacted during election years. Here are some key findings:
- Average Returns: According to Bloomberg, the S&P 500 Index has averaged a 7.11% return during election years. Out of 23 election years since 1928, 19 have seen positive gains.
- Party-Specific Trends: Markets have responded differently based on the elected party. When a Republican is elected, the average return is 11.23%. Conversely, the average return is 3.33% when a Democrat is elected.
- Post-Election Year Trends: The year following the election tends to show a different pattern, with an average return of 5.75%.
Volatility and Resilience
Election years are often characterized by increased market volatility. However, history shows that markets have displayed resilience, typically bouncing back post-election. This pattern highlights the importance of staying informed and prepared for potential fluctuations.
Maintaining a Long-Term Focus
Despite the short-term fluctuations that elections can bring, it’s crucial to maintain a long-term investment strategy. Historical data supports the idea that a well-thought-out, long-term approach can help manage the ups and downs of election cycles.
Conclusion
Understanding historical trends can provide valuable insights as we approach the election. While short-term volatility is expected, the resilience of the market in the long run underscores the importance of a steady, informed investment approach. At Stonewater Financial, we’re here to help you interpret these trends and adjust your strategies accordingly.
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