August 28, 2024 at 09:26AM
The bank notes that knowing the outcome of US elections in advance doesn’t necessarily provide an investing edge.
Pre-Election Market Behavior:
Historical data shows that the S&P 500 index and other markets do not follow a consistent pattern in the six months leading into an election, regardless of whether the government is divided or unified.
Markets typically perform similarly in election years compared to non-election years, and the party of the winning candidate does not significantly affect this trajectory.
Post-Election Observations:
While pre-election periods are generally noisy with little differentiation, post-election periods begin to show some distinctions based on expected policy changes in trade, fiscal, and tax areas.
Data and Analysis:
While returns on stocks, bonds, the USD, and gold may look similar leading up to the election, they start to diverge after election results are announced.
Caveats:
The effectiveness of using past election outcomes to predict future market behavior is limited due to the small sample size of elections and changing economic conditions.
Market responses are more likely influenced by macroeconomic conditions and broader shifts in policy priorities over time.
This article was written by Arno V Venter at www.forexlive.com.
