The Potential Impact of the U.S. Presidential Election on the Markets—and What It Means for Investors
The stock market has seen its share of volatility in 2020. Through the first nine months of this year, the S&P 500 moved up or down by at least 2% on 42 days.1 This already makes it the most volatile year for U.S. stocks since the 2008–2009 Financial Crisis. We’ve been through a pandemic, disruption to the global economy, turbulence to the capital markets, and, of course, a highly contentious presidential election.
According to BlackRock, stocks tend to perform similarly in the final months of the year regardless of whether it’s an election year. From 1926 to 2019, the average monthly performance of U.S. large-cap stocks was 1.4% and 1.6% in November and December, respectively. In election years only, the average returns were 1.3% in November and 1.7% in December.2
However, for many people, this does not feel like an ordinary election year.
Amid the backdrop of the pandemic and a political environment that is approaching a boiling point, many investors are asking if we can really treat this election period like any other.
In this paper, we’ll investigate some common concerns about the upcoming presidential election and work through various possible scenarios for the coming months.