top of page
  • Writer's pictureRealFacts Editorial Team

Navigating The Markets During Election Years


Trump and Biden

Recent global events demonstrate that election years and their outcomes can significantly impact the stock market. After the recent Mexican presidential election, the iShares MSCI Mexico ETF (EWW) dropped over 10% following Claudia Sheinbaum’s victory. Additionally, the peso weakened by about 4.1 percent against the U.S. dollar, reaching its lowest level since November. Investors expressed concerns about Sheinbaum’s potential influence on the legislative agenda, given her party’s supermajority in the lower house. 


Similarly, the iShares MSCI India ETF (INDA) experienced volatility after Indian Prime Minister Narendra Modi's reelection but loss of parliamentary seats, demonstrating how political shifts can influence investor sentiment and market movements. Given these recent events, it is insightful to consider how the upcoming November election will impact the US markets. Data from 1949 to 2023 shows that election years often see market gains, particularly when an incumbent president is running. This is because the market tends to favor the stability and predictability that come with known candidates. 


Speaking on this issue, Justin Nielsen, an author for Investors Business Daily, reported on the possible effects of this year's election in a recent article, drawing from the insights of Jeffrey Hirsch, editor of The Stock Trader’s Almanac. Hirsch said, "We're in a unique situation with this election…The decision comes down to one of two known entities. Either way, we kind of know what to expect."Additionally, Hirsch noted, "We had a strong May and that tends to benefit the next seven months of the year." Regarding the stock market in election years, he stated, "Typically it's up 70% of the time and tacks on an average gain of 8.6% for the S&P 500. Plus, June tends to be the third best month for the S&P 500 in an election year." With this historical data in mind, investors should closely monitor the markets during the remainder of this election cycle to avoid missing potential upside gains that have been observed in past election years.

Comments


bottom of page