Historically, the stock market tends to perform better when the incumbent political party wins a U.S. presidential election, while declines are more common when it doesn’t.
Data shows that between Election Day and Inauguration Day, the Dow Jones Industrial Average has averaged a 4.4% gain when the incumbent party wins, compared to a 2.0% decline when it loses.
Be ready for potential struggles in the U.S. stock market following Election Day—not due to expected delays or uncertainty in the 2024 election outcome, but because U.S. stocks often underperform in the weeks following Election Day.
Since the Dow’s inception in the late 1890s, historical data shows that in 42% of post-election periods, the Dow was lower on Inauguration Day than on Election Day. This trend serves as a reminder against assuming recent market strength will indefinitely continue.
When the incumbent party loses, any post-election rally is often short-lived. The realities of governing differ greatly from campaign promises, with powerful interest groups seeing a shortfall in fulfilled promises.
In elections where the incumbent party has lost since 1900, the Dow was down on Inauguration Day 62% of the time, compared to just 28% when the incumbent party retained the presidency.
Bottom line? Expect possible market volatility and uncertainty in the months following the November 5 election, especially if the incumbent party loses.
