Election Year and the Markets
Our team is already getting many questions about what the 2024 election could mean for markets. From concerns about the stability of our institutions, to how a change in control of the White House could impact tech regulation and impact FANMAG stocks - there’s a lot of uncertainty looking to next year.
It’s important to note that the market hates uncertainty, creating a headwind for 2024. Historically, increased volatility has characterized election years as investors react to the changing political environment. Leading up to the election is typically marked by caution and uncertainty as the market digests the potential policy changes that could come with a shift in administration.
What’s unique about 2024 is that the current most likely matchup is an incumbent president against a former president - something we last experienced in 1912 when Teddy Roosevelt attempted a comeback as a Bull Moose. From a policy perspective, this may make it easier for the market (and voters, for that matter) to digest the alternatives.
As the election draws closer, market movements historically have become more pronounced, with investors closely watching candidate policies, debates, and polls. Volatility tends to peak around election day, as the outcome becomes clearer. Markets have typically shown a degree of resilience in the aftermath of elections, regardless of the winner. Once the uncertainty of the political transition diminishes, investors often gain confidence, and the markets may experience a post-election rally.
The performance of the stock markets during US presidential election years is not solely dependent on the election results. Economic fundamentals, global events, and monetary policy also play significant roles - the 2020 election saw massive uncertainty but market returns that year were driven by the pandemic, stimulus, and a late-year IPO surge that drove markets upwards into 2021.
All of this to say is that we don’t have a crystal ball, but the odds are that dysfunctional government is likely here to stay, and as long-term investors, we ought not to get caught up in the short-term political - or market - volatility and rather focus on if our portfolio is aligned with our goals and long-term financial plan.