Election Year and the Stock Market: They Go Together Like Water and Oil
Uncertainty and the stock market do not mix well. What does this mean for your investments? Every four years, investors endure an election market with full-on mudslinging. Presidential candidates leave no stone unturned and expose everything to gain an upper hand. As we move into 2024, the stock market braces itself for the current presidential cycle, signifying a critical juncture for investors.
This article will shed light on what to anticipate in the next 12 months and the significance of 2024 in the Presidential Cycle
Historically, the markets tend to do okay during election years. It does not seem to matter if the current president is Democrat or Republican. The reasoning behind this performance lies in the incumbent president’s tendency to boost the economy through fiscal spending in a bid to enhance their re-election prospects.
There are always other factors at play, but since the market historically delivers solid returns, it’s important to note that the gains are often characterized by choppiness and tend to materialize predominantly in the latter half of the year. As with anything a president does, it takes time to put things that stimulate the economy in place and even more time for them to affect the economy.
- January through May: Lifeless performance—sideways choppiness in the markets.
- June through August: Summer rally as the incumbent president tries to stimulate the markets and economy.
- September through October: Pre-election dip. This is mudslinging at its worst.
- November through December: Post-election relief rally. Markets can breathe again as they now have more certainty going into the new year.
Despite the anticipated choppiness in the initial months of 2024, inflation will again continue to play a large role in what transpires in 2024. Assuming inflation is held in check and interest rates start to decrease as suggested in the December Federal Reserve meeting, this could in turn stimulate the markets later in the year.
While historical trends provide a valuable guide, the market’s intricacies demand a vigilant and adaptable approach. Investors, armed with insights, can navigate the potentially choppy waters of 2024 with a little more confidence.