Trending Assets
Top investors this month
Trending Assets
Top investors this month
Ultimate 2024 Election Year Playbook
Election season is finally here.
Let the mudslinging begin!
Here’s your ultimate 2024 election year playbook.
Let’s face it, after June’s presidential debate, nerves are running high heading into November.
That’s perfectly normal.
Presidential candidates tend to highlight society’s biggest problems and their campaigns reinforce those negative narratives in the media.
It’s no wonder investors get spooked and move to the sidelines.
But don’t make that mistake.
Today we’re going to set the record straight by not only reviewing history…but, also providing a time-tested tactical strategy to help you profit heading into the vote and beyond.
Don’t get scared, get prepared!
Investors tend to over extrapolate how much politicians will impact what matters most to stocks – earnings and interest rates.
A recent Capital Group study found investors overwhelmingly favor cash over stocks in election years. Since 1993, they’ve invested 4X more in money markets than in equity funds and ETFs in election years.
Political jitters have cost investors bigtime.
Check out stock market performance in each year of the four-year presidential cycle.
Since 1928, the third year of a president’s term has been by far the best for stocks with the S&P 500 up an impressive 18% (chart).
The election year comes in second at a healthy 10.7% and the first year of a president’s term is third, up a solid 8%.
Only the second year – the midterm election year – has been consistently weak, eking out a measly 0.6% average advance:
The data is clear. Cashing out of stocks over electoral uncertainty has been a losing investment strategy.
But it could be even more dangerous in 2024.
Since 1979, election years see the S&P 500 average a 2nd half performance of 4.03%. However, when the 1st half is up at least 7% (like 2024’s 14.48% rip), the expected gain doubles to 8.65%:
Up to this point, the evidence points to holding stocks.
Now, if you’re feeling unsettled given a potential switch in the Democratic nominee or a surprise GOP win…we don’t blame you.
That said, it likely doesn’t matter who’s first to 270 electoral votes.
Everyone has their own political preferences. Many strongly support either Democrats or Republicans.
However, when it comes to investing, stocks seem to like both parties. The S&P 500 has done well under both Republican and Democratic presidents (chart).
There isn’t a strong correlation between equity performance and which party controls the White House:
Staying the course isn’t a bad idea.
But there’s more work to do.
We know there are a few different political scenarios that can play out regarding the House and the Senate.
Don’t worry, our ultimate 2024 election playbook has you covered!
The clearest trend when analyzing markets under various political scenarios is that equities do best when Congress is split with different parties controlling the House of Representatives and the Senate.
Since 1933, stocks have risen 13.6% under Democrats with a split Congress and a 13.7% under Republicans (chart).
Why?
Probably because investors don’t like uncertainty. Shared political power forces incrementalism, making big policy and legislative surprises less likely.
2023 and the first half of 2024 are cases in point. Stocks have soared with the GOP running the house while Democrats control the senate:
Other performance trends that jump out are a mixed bag with one favoring Republicans and the other Democrats.
When one party controls everything – the White House and Congress – Republicans have overseen much stronger stock markets than Democrats, averaging 12.9% gains vs. only 9% for Democrats.
But when the President has been a Democrat and Republicans have controlled both houses of Congress, stocks have averaged 13% gains, far outpacing the 4.9% returns under Republican Presidents with Democratic controlled congresses.
Here’s the bottom line: stocks have done best when the same party doesn’t control the House of Representatives and the Senate, regardless of which party resides at 1600 Pennsylvania Avenue.
OK so how can you profit from all of this great election intel?
There are 2 big tactical takeaways:
#1: Resist the urge to sell stocks because of the election.
Markets average big gains in election years, especially when the year starts off as strong as 2024.
They also average solid gains in the first year of new Presidential terms. And history says if Congress stays divided the 2025 outlook is even more bullish.
#2: Buy into any pre-election selling.
History shows many investors just can’t resist dumping stocks ahead of elections.
The S&P 500 Index was born in 1926. In all Presidential election years since 1928, the S&P 500 has averaged losses of 0.5% and 0.3% in September and October, respectively (chart).
Here’s the good news. The S&P has rebounded sharply after elections, averaging gains of 1.2% and 1.5% respectively in November and December of all Presidential election years since 1928.
That’s why we say: don’t focus on the outcome of the election, but what happens before.
It’s a safe bet that any pre-election selling will give way to big buying once electoral uncertainty passes.
And this playbook played out perfectly last go round, when we beat the drum on the election trade of 2020.
We showed then how institutions routinely sell stocks before the vote then quickly scoop them up once the winner is decided.
The setup is looking similar today with the Big Money Index (BMI) flirting with lows, with 4 months to go.
Buy the pre-election dip.
Ride the post-election rip.
Let’s wrap up.
Here’s the Bottom Line: We know it’s easy to get spooked by endless pre-election noise.
Presidential candidates tend to highlight society’s biggest problems and their campaigns use social media to hammer home negative narratives.
But investors need to understand that over the long term, earnings growth is what matters.
Stocks average solid gains in election years and in the first year of new Presidential terms. And history says if Congress stays divided, the 2025 outlook can get even more painful for the bears.
Plan for the crowd to dump stocks months before November. Over the past nearly hundred years, the S&P falls .5% in September and .3% in October.
That’ll create a great buying opportunity for the smart money (that’s you). That selloff will ricochet higher through year-end, averaging gains of 1.2% and 1.5% respectively in November and December.
So, tune out election noise and buy into any pre-vote volatility, you’ll be glad you did!
If you want to find specific large-, mid-, and small-cap names ramping with Big Money support, get started with a MAPsignals PRO subscription. It’ll get you access to our portal that updates every morning, showcasing the exact tickers being bought and their scores.
Our prized Top 20 list is full of cyclical market beaters. This is the report that found every winner in our research.
There are plenty of quality names to get long as volatility ramps into the election. Use an election MAP for navigation.
Invest well,
-Alec Young
MAPsignals
Products - MAPsignals
Whether you’re a part-time investor or an experienced pro, we cover all the bases by offering a variety of products to suit your investing style, whatever it may be. No matter which advisory you read, you’ll still get the same matchless data and analysis that MAPsignals proprietary platform provides. So check out our product descriptions... Read more »
Already have an account?