Stock-Market Election Guide 2024

A playbook you'll want to have ready, Democrat or Republican... [TradeSmith Daily logo] [TradeSmith Daily logo] October 31, 2024 Stock-Market Election Guide 2024 BY LUCAS DOWNEY, CONTRIBUTING EDITOR, TRADESMITH DAILY We are just days away from arguably the biggest U.S. presidential election in recent history…at least, that’s what the mainstream media will have you believe. Regardless of what side of the aisle you’re on, today’s data-heavy study will help empower you in the weeks and months post the vote. Today’s TradeSmith Daily is your guide on how to trade the stock market once the election dust clears. We’ll dissect which areas are primed to rip and dip, both near-term and long-term. Even more, we’ll offer a historical answer to a burning question that’s on everyone’s mind: What can I expect for my portfolio if a Democrat or a Republican secures the Oval Office? No matter if you’re a die-hard donkey or an emphatic elephant, odds are you’ll want to have this playbook at the ready as we head into year-end. Follow along as we set the record straight! Your 2024 Stock-Market Election Guide Elections stir up a lot of emotion and financial content. That’s because some of the most notable market declines occurred in election years. In 2000, we had the tech bubble burst. Then in 2008 came the ultra-painful financial crisis. Without question, there’s an ugly history to election years. But when you zoom out, you’re able to capture a better picture of typical market behavior. SPONSORED AD [Market Chaos Coming 24 Hours AFTER Election Day?]( [image]( If you think the stock market is going to continue marching higher… [You need to see this urgent warning.]( New evidence an industry insider has found points to a “chaos convergence” coming out of Washington D.C. the day after election day. While most folks are simply preparing for a repeat of the contested election results of 2020, the truth is unlike anything you’re prepared for… [Watch Now.]( While most election-period studies only include the S&P 500, we’ll also examine the tech-heavy Nasdaq 100 and the small-cap Russell 2000 in our mix. Today’s studies will dissect the nine election periods from 1988–2020. This includes four Republican and five Democrat Presidential election winners. All returns will be measured from election day in November. First up, let’s examine the near-term picture for large- and small-cap stocks. Since 1988, here’s how stocks performed after election day: - Two weeks after, the S&P 500 fell an average of 0.9% while the Nasdaq 100 dropped 2.2%. - Two months past the vote, the S&P 500 gained 2.4%, on average, while the Nasdaq 100 bumped 1.4%. - Meanwhile, two months later the Russell 2000 had vaulted 6.6%, on average… and was ahead of the other benchmarks on the other timeframes as well. [chart]( From this near-term angle, expect a wobble in the days after next Tuesday. And expect a nice lift for small caps. The above illustration may elicit a dramatic feeling of potential downside ahead… However, look at this… Zooming out reveals that a few months after election day, stocks of all size ripped higher, especially on the six-month and 12-month timeframe. - Six months after the November vote, the S&P 500 had jumped 7.1%, the Nasdaq 100 climbed 5.6%, and the Russell 2000 ramped 10.6%, on average. - 12 months post the Presidential election vote saw the S&P lift 15.3%, the Nasdaq 100 rally 17.6%, and the Russell 2000 catapult 20.4%, on average. It appears election day is a great one-year buy signal across the board: [chart]( The bottom line about elections is simple: Expect some chop for major indices two weeks out. But don’t get too bearish, because six and 12 months out reveals healthy gains all around. No matter the timeframe, small caps perform the best… so, make sure you’ve got some sliver of your portfolio dedicated to lesser followed under-the-radar names. That’s not the end of the story, though… History reveals how a Democratic win and Republican win vastly differ when it comes to stock-market performance… The Presidential Edge Back in July, we alerted everyone that a mega-rotation underway. Effectively a [portfolio equalizer trade was set in motion](. This is important because from time to time, certain equity benchmarks get stretched and lay the groundwork for a reversion trade. Similarly, elections can cause dislocations, too! By using the same framework from above – but only reviewing election years when a Democrat won the Oval Office – we see a few key points: - One to two weeks out saw the S&P 500, Nasdaq 100, and Russell 2000 all return negative performances. - Three months out the Nasdaq 100 jumped 8% and the Russell 2000 lifted 10%. - 12 months after a Democrat won the White House, the S&P 500 jumped 21.7%, the Nasdaq 100 ripped 29.3% higher, and the Russell 2000 galloped 29%. A Democratic win has greatly favored the Nasdaq 100 and small-cap stocks: [chart]( Now let’s talk about the elephant in the room… a Republican victory. Here’s where equity styles show a big divergence. Get your notebooks out. Since 1988 – 2020, when a Republican won in November, the tech-heavy Nasdaq fell 2.3%, on average, in the week following the vote. Two weeks later the technology benchmark fell 3.9%. On the flipside, the Russell 2000 jumped 1.8% on average a week later and 1.4% two weeks later. Zooming out to six months, the Nasdaq 100 averaged a 3.1% drop while the S&P 500 gained 3.6% and the Russell 2000 lifted 6.8%. Most telling of all is the 12-month returns, where again small-caps led with a 9.6% gain followed by a 7.4% lift in the S&P 500, and a modest 3.1% gain for the Nasdaq 100: [chart]( Keep all of these charts handy in the weeks and months ahead. The Big Money is likely looking at the same data we are. And we should see their capital piling into one specific area of the market: small caps. In all illustrations above, the Russell 2000 had a healthy gain in all scenarios, regardless of Republican or Democratic win. Throw in the fact that the Fed has started cutting rates and we’re likely to dodge a recession, and [that backdrop also bodes well for a small-cap revival](. Listen, there’s going to be a lot of mudslinging in the next few days. Don’t let that sideline your investing journey. Let state-of-the-art software help guide through 2025. Tomorrow’s leaders can be found today. That’s where TradeSmith shines. As it relates to next Tuesday, the big winner might just be your portfolio! For more on the topic of investing through election-season chaos, [go here to watch this free webinar]( by Louis Navellier and Charles Sizemore of The Freeport Society – including their pick for a specific post-election trade. Regards, Lucas Downey Contributing Editor, TradeSmith Daily Get Instant Access Click to read these free reports and automatically sign up for research throughout the week. [25 Doomed Blue Chip Stocks]( [3 Stocks to Build Your Wealth in 2024]( [5 Unapologetically Profitable Stocks for 2024]( © 2024 TradeSmith, LLC. All Rights Reserved. 1125 N. Charles Street, Baltimore, MD 21201 To unsubscribe or change your email preferences, please [click here](. [Terms of use]( | [Privacy Policy](