Stock Performance Ahead of Presidential Election 2024
True Root Financial is a financial advisor and financial planner based in San Francisco, CA. We serve clients across the globe.
As we approach Election 2024, investors are eyeing the stock market with a mix of anticipation and caution. Understanding how stocks typically behave in the lead-up to presidential elections can provide valuable insights for tech-savvy investors. In this article, we’ll explore historical market trends and offer tailored insights for investors, particularly those with a keen interest in technology-related industries.
Key takeaways:
- Stocks tend to perform well during election years, unless we see a recession
- During the election years, the stock market starts out sluggish, but it often ends up positive, boosting confidence
- 2024 has been anything but sluggish with the first quarter US stock suring by 10.6%. If history is any guide, a strong first quarter performance is typically followed by a strong performance for the remainer of the year
- Sectors like technology and energy have performed well regardless of which party comes into power
- The Fed will likely be data dependent before deciding to lower interest rates so that they do not look political
- What matters most is staying invested rather than trying to time your investment by any political party
Stocks generally perform well during election years:
First of all, the good news: US stocks generally perform well during election years. If you look at the chart below, since 1926, presidential election years have seen an average return of 11.6% compared an average return of 10.3 for all years combined. 
Source: BlackRock
If we look at each of the years, almost all presidential election years have ended positive except for years where the market experienced a recession.. We saw this during the financial cirsis of 2008 as well as the dot com bubble burst of 2000 – both were election years characterized by a large macroeconomic event. If history is any guide, as long as we do not experience a recession in 2024, we should continue to see a positive return in stocks for the year.
Now let’s analyze what happens before and after the election
Presidential election years typically start with a slow first half, but pick up momentum significantly in the latter half, particularly in the third and fourth quarter.
Source: BlackRock
Will the strong stock market performance continue for the rest of the year?
The first quarter of 2024 saw US stocks up 10.6%. But will that hold up for the rest of the year? If we look at the performance of stocks for all years where the first quarter was so strong, the rest of the year has also generally performed well. In fact, since 1926, there have been only two instances (in 1987 and 1930) where after a strong first quarter performance of over 10%, the remaining 9 months ended up in the negative territory.
Will the Fed lower interest rates due to the presidential election?
The Fed Chairman, Jerome Powell has telegraphed to the market on multiple occasions that they continue to be data dependent before deciding to cut the interest rate. Notably, the Fed needs to see that inflation has largely come under control and is headed in the right direction before they cut interest rates. Given this speech, the Fed lowering interest rates without strong data would be largely seen as the Fed trying to “tip the scale” and be political, which it will likely avoid.
Historically, The Fed has cut interest rates in election years. More recently, it did so during the Covid crisis of 2020 and the Financial Crisis of 2008. Both cuts were to support the economy during a massive shock and were part of the Fed’s mandate.
Understanding Market Sentiment and Policy Expectations:
Market sentiment plays a significant role in driving stock market movements ahead of presidential elections. Economic indicators, political developments, and public opinion polls all influence investor sentiment and market dynamics.
Tech-savvy investors should stay informed about potential policy changes, as these can have significant implications for technology-related industries.
Sector-Specific Insights and Policy Impacts:
Regardless of which political party gets in power, certain sectors have historically performed better than others during various presidencies. Info. Technology and energy sectors, in particular, have often demonstrated resilience regardless of the party in power: 
Source: BlackRock
Major trends observed include:
- Technology has consistently ranked among the top two sectors during four out of the last five presidential administrations.
- Energy emerged as the best-performing sector for both the Biden and Bush presidencies.
- During the Obama and Trump administrations, the top three performing sectors remained consistent, along with the weakest performer, which was Energy.
Analysts predict that technology companies focused on cybersecurity, cloud computing, and digital transformation will continue to outperform leading up to Election 2024. However, it’s essential to consider potential policy impacts, such as regulatory changes or shifts in government spending priorities, which could affect technology-related industries.
Preparing Your Portfolio for Election 2024:
At the end of the day, what matters is the time in the market and not which political party comes to power. If you had invested $100,000 since 2013 regardless of which political party was in power, you would end up with $311,000. If you invested only during democratic or republican presidencies, you would end up with $172K and $181K. So, regardless of which political parrty comes to power, staying invested and diversifying remain your key strategy for growing your portfolio.
Next step for you
Are you confident that your portfolio will continue to thrive despite the volatility of an election year and beyond? Do you know if you have enough savings and investments to live the life you want? If you are curious how we can help you get to that place, book a call below today.
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