Stocks tend to rally in the year before U.S. presidential elections, providing some comfort to investors concerned about a highly contentious 2024 election. Data shows that the S&P 500 has seen an average total return of around 10% in presidential election years based on data going back to 1928. However, the large-cap benchmark had already rallied by more than that between early November and the end of the previous year. Saira Malik, the chief investment officer at Nuveen, which manages $1.2 trillion in assets, expressed concern about the concerns about equities due to pre-election gains possibly already occurring, volatility in election years, and the possible mismatch between investor expectations on interest rate cuts and the Federal Reserve’s likely actions.
Concerns also stem from the expensive valuation of stock markets and the highly contentious nature of the 2024 election. Donald Trump is the front-runner for the Republican nomination, while Joe Biden faces low approval ratings, adding to the unpredictability of the election. The market’s performance typically reflects the economic conditions and can be telling about a candidate’s prospects. Meanwhile, strong gains in the stock market can predict the winner of the election, indicating its strong predictive power. With concerns about cyclical risk and politically inspired volatility, focusing on stocks of dividend growers and global infrastructure plays are seen as potential defensive strategies.
Overall, the environment surrounding the 2024 election and its potential impact on the stock market are causing concerns among investors and market analysts. The stock market’s historical trends during election years are being closely analyzed to predict and understand how the 2024 U.S. presidential election could impact the market’s direction and investment strategies.