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A November to Remember

With only a few weeks until the election, uncertainty regarding the outcome and the unprecedented circumstances we live in are reflected in jittery global equity markets.

One could even argue that it’s almost a reassuring sign that markets are exhibiting their usual election year October behavior, as illustrated in the chart below. Historically, election year September and October stock market performance tends to be weak.  

Providing some historical perspective may help wealth and asset managers reassure their clients that it’s key to focus on the long term. Trying to predict outcomes and reactions to the markets is impossible. Prior to the 2016 election, more than one expert predicted that if Trump were elected the markets could and/or would tank and the U.S. could enter into recession. Then on election night, as it became increasingly clear that Trump was going to win, stock market futures dropped dramatically, and the S&P 500 declined rapidly in pre-market trading, triggering the circuit breaker to temporarily halt trading. But by the closing bell, the index was up for the day. 

Markets are Agnostic
Another historical trend may help to alleviate fears, no matter the candidate each of your clients support. Markets don’t really seem to care which party is in power. Again, this speaks to a long-term perspective, while not losing sight, of course, of the impact that short-term market movements can have on cash flow and spending.   

Source: FMRCo. Monthly data since 1789 through end of 2019 (mix of S&P 500, DJIA and Cowles Commission). Note that since the party system was not “Republican vs. Democrat” for part of the period in question, the various occurrences used to calculate these results do not add up to the total number of elections since 1789.