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Will The US Election Outcome Shake Up Markets?

Analyst Team trader
Updated 9 Mar 2024

As the US gears up for the 2024 elections, anyone paying attention to financial markets is bracing for an inundation of headlines and pundit speculations. Elections, by nature, provoke discourse and debates on the impact a change in the political landscape may have on the markets.

Historical precedent suggests that the financial markets are relatively unmoved by the party colours draped over the White House. Instead, they ebb and flow to the rhythm of the broader business cycle. This detachment from political outcomes is underscored by the revelations of Super Tuesday, which seem to have queued up a political rematch between the incumbent, Joe Biden, and his predecessor, Donald Trump.

united states economic power

Despite the stark contrasts in policies and philosophies, investors may find solace in the historical performance of markets, notably the S&P 500, which registered impressive gains from 2008 to 2020. During this period, the markets witnessed the global financial crisis, various international conflicts, and unplanned disruptions like the Covid-19 pandemic. Yet, they largely held their ground, seemingly indifferent to the rotating political guard.

Financial history reveals that market outperformance is a phenomenon that transcends the political divide. Both Democratic and Republican administrations have steered the ship through choppy waters, including budgetary disputes and global crises, all while markets have maintained an upward trajectory. The message to investors remains clear: focus on the fundamentals.

As we turn our zoom lens on the day-to-day developments of the upcoming election, financial advisors are preaching a different gospel—one of prudence and attention to the underlying economic indicators that have a more direct bearing on investment outcomes. As such, savvy investors are encouraged not to get caught in the vortices of election coverage but instead to maintain a strategic vision, calibrating portfolio allocations across sectors, asset classes, and individual securities with a keen eye on the long-term horizon.

Indeed, as the political drama unfolds and the contest between Biden and Trump intensifies, the markets continue to operate on a parallel track that regards such scuffles as mere background noise. For those filling their coffers for the future, a deep understanding of economic cycles, corporate health, and global trade patterns is likely to be much more lucrative than any bet placed on the victor of the presidential race.

Within this context, as the election draws nearer and campaign trails blaze through states, investors are well-advised to fortify their portfolios' foundations. There are always sector variances based on underlying policy differences and the impact on specific industries, but that is on a more granular level. Delving deep into financial reports, sectoral trends, and diversification strategies may yield more fruit than tuning into the cacophony of campaign slogans and debates.

It would certainly be easier to take a view off the back of an election, but the market's historical conduct tells a tale of resilience and persistence, and one that sees beyond the tenure of administrations.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.