2024 Election: Weighing the S&P 500's Future
Thursday, Oct 10, 2024 10:16 am ET
2min read The 2024 U.S. presidential election is poised to have a significant impact on the S&P 500, with investors closely monitoring the race between Vice President Kamala Harris and former President Donald Trump. The election's outcome could shape the market's trajectory, as both candidates bring distinct economic policies and market implications. This article explores how the 2024 election could influence the S&P 500, drawing on historical data and expert analysis.
Historically, the S&P 500's performance in the months leading up to an election has been a reliable indicator of the U.S. election outcome. Since 1984, a positive return from August through October has consistently favored the incumbent party, while a negative return has signaled their defeat. In 2024, the S&P 500's 1.7% gain during this period could bode well for Harris' campaign.
However, the 2024 election cycle has been anything but ordinary. The withdrawal of President Joe Biden and assassination attempts on Trump have added layers of uncertainty. Looking back to 1968, a similarly chaotic election year, the S&P 500 rallied 15% during the period between President Lyndon Johnson's announcement not to seek re-election and the end of the year. This historical precedent suggests that the S&P 500 may remain resilient despite the political turmoil.
The economic policies of Trump and Harris, as implemented during their respective tenures, have influenced the S&P 500's performance. During Trump's presidency, the S&P 500 gained about 16.3% annually, while under Biden and Harris, it gained about 11.8% annually. The "Trump Trade," a bet on the former president's return to the White House and GOP control of Congress, initially pushed the S&P 500 to a record high in July but has since unwound following Harris' ascension to the top of the Democratic ticket.
The potential outcomes of the 2024 election, including a clean sweep or divided government, could significantly impact the S&P 500's earnings, tax policies, and fiscal stimulus. A clean sweep by either party could result in more stimulative fiscal policies, producing faster near-term growth but potentially higher inflation, bloated deficits, and fewer Federal Reserve rate cuts. In contrast, a divided government could lead to more austere budgets and a more stable economic outlook.
Investors are closely monitoring the election, with some favoring a divided government due to concerns about the costs and inflation impacts of higher tariffs and trade wars under a second Trump administration. Conversely, a Harris victory with a GOP Senate is expected to have a muted impact on financial markets, with little chance of increases in corporate or capital gains taxes.
As the 2024 election approaches, investors should remain vigilant and consider the potential implications for the S&P 500. The market's performance in the months leading up to the election, the unique developments in the 2024 election cycle, and the economic policies of the leading candidates all play a role in shaping the S&P 500's future. By staying informed and adapting their investment strategies accordingly, investors can better navigate the potential challenges and opportunities that the 2024 election may bring.
Historically, the S&P 500's performance in the months leading up to an election has been a reliable indicator of the U.S. election outcome. Since 1984, a positive return from August through October has consistently favored the incumbent party, while a negative return has signaled their defeat. In 2024, the S&P 500's 1.7% gain during this period could bode well for Harris' campaign.
However, the 2024 election cycle has been anything but ordinary. The withdrawal of President Joe Biden and assassination attempts on Trump have added layers of uncertainty. Looking back to 1968, a similarly chaotic election year, the S&P 500 rallied 15% during the period between President Lyndon Johnson's announcement not to seek re-election and the end of the year. This historical precedent suggests that the S&P 500 may remain resilient despite the political turmoil.
The economic policies of Trump and Harris, as implemented during their respective tenures, have influenced the S&P 500's performance. During Trump's presidency, the S&P 500 gained about 16.3% annually, while under Biden and Harris, it gained about 11.8% annually. The "Trump Trade," a bet on the former president's return to the White House and GOP control of Congress, initially pushed the S&P 500 to a record high in July but has since unwound following Harris' ascension to the top of the Democratic ticket.
The potential outcomes of the 2024 election, including a clean sweep or divided government, could significantly impact the S&P 500's earnings, tax policies, and fiscal stimulus. A clean sweep by either party could result in more stimulative fiscal policies, producing faster near-term growth but potentially higher inflation, bloated deficits, and fewer Federal Reserve rate cuts. In contrast, a divided government could lead to more austere budgets and a more stable economic outlook.
Investors are closely monitoring the election, with some favoring a divided government due to concerns about the costs and inflation impacts of higher tariffs and trade wars under a second Trump administration. Conversely, a Harris victory with a GOP Senate is expected to have a muted impact on financial markets, with little chance of increases in corporate or capital gains taxes.
As the 2024 election approaches, investors should remain vigilant and consider the potential implications for the S&P 500. The market's performance in the months leading up to the election, the unique developments in the 2024 election cycle, and the economic policies of the leading candidates all play a role in shaping the S&P 500's future. By staying informed and adapting their investment strategies accordingly, investors can better navigate the potential challenges and opportunities that the 2024 election may bring.