Get ready for the U.S. stock market to have a rough time after the election.
There’s no reason for this except that the 2024 presidential election is not likely to be settled quickly and only after a time of intense uncertainty. This is because, over the long term, U.S. stocks usually do worse than average after Election Day.
Based on Dow Jones Industrial Average DJIA -0.36% returns going back to the company’s start in the late 1890s, the chart below shows the general pattern of the past. The study looks at how the Dow has done on average in the month following every November election day since 1900, as well as its average return from Election Day to the first day of the new year. The chart shows how these returns after the election stack up against the average return of the Dow for all time periods that are about the same length.
Even though there aren’t many changes between the returns after Election Day and the overall average, they are a good reminder for those of us who think that the recent past will always be true. In 42% of the times after an election since 1900, the Dow was lower on Inauguration Day than it was on Election Day. Along with what I wrote a month ago about how the stock market often has trouble after Inauguration Day, we should be ready for a couple of months of chaos.
Incumbents have the advantage
Next, I looked into whether the stock market’s success after an election is linked to which party wins the White House. The answer is yes: the Dow has an average return of 4.4% from Election Day to Inauguration Day when the incumbent party wins, but an average loss of 2.0% when the ruling party loses.