Historically, there is a correlation between presidential elections and stock market performance.
However, it’s important to note that many factors influence the stock market, and elections are just one of them.
Here are some key takeaways:
- Historically, stock (equity) and bond markets exhibit more restrained performance in the year leading up to a presidential election.
- There are observable historical trends about stock market performance before, during, and after presidential elections.
- It’s common for administrations to employ fiscal policy in a way designed to stimulate the economy just before a presidential election.
- The presidential election cycle theory attempts to predict trends in U.S. stock markets following the election of a new president.
- Wall Street often favours specific years of the presidential cycle.
- Presidential elections may have some impact on stock market returns.
Also, an analysis of the stock market history dating back to 1926 shows that returns in months when presidential elections took place don’t display consistent patterns. Most election months haven’t produced extreme returns in one direction or the other, and the winning party hasn’t been a reliable driver for the direction or magnitude of market movements in election months. This history of market behaviour during election months makes a strong case for sticking with a plan to achieve long-term goals.
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