As the United States gears up for another presidential election, investors are bracing themselves for what has become a familiar pattern: market volatility. According to Ryan Lewenza, a portfolio manager at Turner Investments, Raymond James, election periods historically trigger declines in the stock market. Lewenza bases his predictions on an analysis of the S&P 500 Index’s performance over the last eight election cycles since 2000. In these years, he has observed a consistent downward trend starting around August and continuing through the fall, averaging a decline of six percent. This pattern underscores the market’s aversion to uncertainty, a hallmark of election times, regardless of whether a Democrat or Republican is in contention.
Historical Market Behavior During Elections
Lewenza describes the recurring market behavior as “almost uncanny,” noting that the market often bottoms out right around the time of the election. This bottoming is usually followed by a rebound shortly after the election results are in. The predictability of this volatility can be attributed to the uncertainty surrounding potential policy changes that could be enacted by a new administration. When markets lack clarity about future economic policies, investor sentiment tends to become cautious, leading to sell-offs and reduced market activity. This reaction is seen as normal market behavior and has been observable across multiple election cycles, reflecting a deep-seated aversion to the unknown. The fascinating aspect is that even though each election brings its unique set of uncertainties and characters, the market’s overall behavior remains strikingly consistent.
Broader Market Implications
As the United States prepares for yet another presidential election, investors are once again bracing for the familiar market turbulence that often accompanies these periods. Historically, election cycles have led to market volatility, a trend supported by Ryan Lewenza, a portfolio manager at Turner Investments, Raymond James. Lewenza’s analysis of the S&P 500 Index’s performance over the past eight election cycles since 2000 reveals a clear pattern: the market tends to experience significant declines starting in August and continuing through the fall, with an average drop of six percent. This consistent downward trajectory highlights the market’s aversion to the uncertainty that elections bring, regardless of whether a Democrat or Republican is running for office. The repeated pattern underscores how political transitions inject a sense of unpredictability into the financial markets, causing investors to become jittery. As a result, election cycles are often viewed as a period of caution for those investing in stocks, further emphasizing the market’s sensitivity to political changes.
