Learn from history: How will the US stock market perform after the election?

Zhitong Finance learned that history shows that the U.S. stock market typically rises after presidential elections, but investors first need to prepare for some short-term volatility. Data indicates that since 1980, the three major U.S. stock indices have averaged increases from Election Day to the end of the presidential election year. However, history suggests that investors should not expect the stock market to rise sharply immediately after the voting ends. In the longer term, election years are generally favorable for the U.S. stock market. Since 1960, the S&P 500 index has risen in nearly every election year. The only exceptions were in 2000 and 2008, which were significantly affected by the bursting of the internet bubble and the financial crisis, respectively. In the recent election cycles, this record looks even better. In the three election years since 2008—2012, 2016, and 2020—the benchmark index rose by at least 10%. From a narrower perspective, focusing only on the last seven months of the election year yields similar results. According to data and analysis from the Stock Trader's Almanac, in 18 U.S. presidential elections since 1950, the S&P 500 index rose 16 times during this period. The year 2000 was a down year, and the other was 2008. In fact, the three major stock indices experienced an average decline on the trading day after the voting and within a week. Data shows that the stock market tends to erase most or all losses within a month. This means that investors should not expect the stock market to rise immediately on Wednesday or in the following days. Given the neck-and-neck situation between the two candidates in this U.S. election, results may not be revealed until Wednesday morning. Therefore, the market may still need to wait for the closely contested congressional elections to determine the final vote count for which party controls both the House and Senate. Amy Ho, Executive Director of Strategic Research at JP Morgan, stated, "The election is now a central factor for the next catalyst in the financial markets. We warn that the uncertainty of the election results may persist, as the presidential campaign may take days to confirm the election results, and the House races may take weeks." This election coincides with a strong year for the U.S. stock market, pushing the major indices to historical highs. According to Bespoke Investment Group, the first 10 months of 2024 have been the best-performing presidential election year since 1936, with an increase of about 20%