Debunking Election Year Myths
As if it wasn’t busy enough, 2024 is the year of elections. Over 40% of the world’s population will hit the polls to elect national leaders. Today, we debunk three common election myths when it comes to markets.
Myth 1: Stocks don’t do well in election years
Generally, stock returns don’t change much in election years. That said, election years do tend to be more volatile than most, especially in the lead-up to voting day. Volatility is a feature, not a bug, of investing in any year, but it tends to be more pronounced as households grapple with more uncertainty. Yet as that uncertainty dissipates as results are announced, stocks tend to rally on a sense of clarity about the path forward.
Myth 2: Markets will crash if so and so candidate wins
While stocks tend to rally in elections’ aftermaths, it’s true that some election years have seen bigger swings than others. But those instances have tended to do more with the underlying macroeconomic backdrop than the election itself.
For instance, in 2020, it was the tides of lockdown and reopening from the Covid-19 pandemic that impacted broad markets most. Or consider 2008 when the unfolding Global Financial Crisis was the predominant driver, rather than opposing candidate views on the war in Iraq and health care policy.
Myth 3: The Federal Reserve doesn’t change policy in election years
Going back to the 1950s, 2012 has been the only election year the Fed did not either raise or lower interest rates. Similar to Myth 2, this suggests the economy, rather than politics, is in the driver’s seat when it comes to monetary policy. We believe this year will be no different.
While politics can evoke strong emotions, we don’t think one should lose sight of their long-term investment goals. We believe the economy will remain the predominant driver of policy decisions and markets broadly.
Rick Barragan is the Managing Director,
Los Angeles Market Manager, for J.P. Morgan Private Bank.
[email protected] | (310) 860-3658
privatebank.jpmorgan.com/los-angeles
Source: J.P. Morgan Private Bank, January 19, 2024. “3 election year myths debunked” By Madison Faller, Global Investment Strategist, and Shawn Snyder, Global Investment Strategist, J.P. Morgan Private Bank.
