A Look at Past Elections and Why This Time is Different

Executive Summary

As we head in the 2020 U.S. presidential election, we are in an environment of heightened political discourse. We are also heading toward an election where many predict a delay in calling the election due to a substantial increase in mail-in/absentee balloting and a potential for contested results. This is all happening in a year of a roller coaster ride for markets, yet a strong performance overall.

Typically, volatility increases as we head into election day and then comes down after. Market participants are wondering what the 2020 elections will bring for markets and how performance will vary across different market segments represented by: S&P 500, Down Jones Industrial Average, Nasdaq Composite and Russell 2000. Inside this note, we update trends on the path of market performance in 2020 and compare patterns in prior election years to extrapolate what could happen over the next few weeks.

We highlight the following (through October 19):

• S&P 500: average = 3,125.75, +7.3% to FY19; peak = 3,580.84, +10.5% to FY19; trough = 2,237.40, -8.6% to FY19
  • 2019 growth (Dec 31/Jan 2) = +28.7%; 2020 growth (Oct 19/Jan 2) = +5.2%; 2019 to 2020 growth (Oct 19, 2020/Jan 2, 2019) = +36.5%
• Dow Jones Industrial Average (DJIA): average = 26,284.87, -0.4% to FY19; peak = 29,551.42, +3.2% to FY19; trough = 18,591.93, -18.0% to FY19
  • 2019 growth (Dec 31/Jan 2) = +22.2%; 2020 growth (Oct 19/Jan 2) = -2.3%; 2019 to 2020 growth (Oct 19, 2020/Jan 2, 2019) = +20.8%
• Nasdaq Composite: average = 9,730.32, +22.5% to FY19; peak = 12,056.44, +33.6% to FY19; trough = 6,860.67, +6.1% to FY19
  • 2019 growth (Dec 31/Jan 2) = +34.6%; 2020 growth (Oct 19/Jan 2) = +26.2%; 2019 to 2020 growth (Oct 19, 2020/Jan 2, 2019) = +72.2%
• Russell 2000: average = 1,454.21, -5.9% to FY19; peak = 1,705.22, +1.6% to FY19; trough = 991.16, -25.5% to FY19
  • 2019 growth (Dec 31/Jan 2) = +23.1; 2020 growth (Oct 19/Jan 2) = -3.2%; 2019 to 2020 growth (Oct 19, 2020/Jan 2, 2019) = +19.0%
• Election Year Trends
  • Incumbent wins? More likely spurs up trends in market prices, but not always
  • Republican or Democrat? A tie for upward trends after E-Day, but favors Republicans when including 2000 (markets went up after the vote counting drama finished)
  • President-elect Trump was a positive for markets in 2016 across all four indexes, after weathering a slight dip right before E-Day around last minute election noise
• Heading into the 2020 Election
  • S&P500 already up 49.2% to the last election in 2016; 7.2% CAGR since 1992
  • DJIA already up 49.2% to the last election in 2016; 7.2% CAGR since 1992
  • Nasdaq already up 49.2% to the last election in 2016; 7.2% CAGR since 1992
  • Russell 2000 already up 49.2% to the last election in 2016; 7.2% CAGR since 1992

Report sections include:

• Recapping 2020 Market Performance
• Election Year Market Performance
• Historical Election Market Performance

 

 

Companion Note

• Market Volatility Around US Presidential Elections

Author

Katie Kolchin, CFA
Director of Research
SIFMA Insights

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