All eyes will be focused on the US Presidential election in November.
Attempted assassination of Donald Trump
The recent attempted assassination of former President Donald Trump has added a layer of uncertainty to the election. Such events can lead to increased volatility in financial markets as investors seek stability in an unpredictable political climate. The impact of this event is still unfolding, and its long-term economic consequences will depend on how it influences voter sentiment and political stability.
Biden’s Withdrawal, Harris the Lead Contender?
President Joe Biden’s unexpected withdrawal from the race has reshaped the Democratic primary. Vice President Kamala Harris has emerged as the lead contender for the Democratic nomination. If elected, she could become the first woman and the first woman of color to hold the office of the President of the United States. This historic candidacy has the potential to mobilise a significant portion of the electorate, particularly among female voters. The candidacy of Kamala Harris is likely to galvanize this key demographic, potentially increasing voter turnout and impacting election outcomes.
Will the Election Increase Market Volatility?
Historically, the stock market has experienced increased volatility in the months leading up to a presidential election. Investors often react to the uncertainty surrounding potential changes in economic policies, tax regulations, and government spending. Ned Davis Research found that since 1900, the average return for the Dow Jones Industrial Average during election years has been 6.0%, compared to the long-term annual average return of 7.3% .
Market reactions to election results vary depending on the perceived economic policies of the winning candidate. For instance, markets often react positively to candidates viewed as pro-business. Conversely, markets may experience short-term declines if the winning candidate is perceived as less favorable to business interests and certain sectors may exhibit more volatility based on the candidates’ policy proposals.
However, Markets Are Efficient.
The Efficient Market Hypothesis (EMH) suggests that all available information, including political events, is already reflected in stock prices. As a result, while markets may react to new election-related information, much of the expected impact is already priced in. We can expect to see market turbulence leading up to the elections, but stability will return once the election results are known.
30 June 2024
By Jenaia Clarke, Operations Director and Financial Adviser
CP Wealth
