Featured article: U.S. Elections – An Important Event for Financial Markets
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U.S. elections – An important event for financial markets
U.S. presidential elections have exerted a large influence on financial markets. This analysis explores historical market trends around U.S. presidential elections, illustrating how election-induced volatility shaped returns and uncovering ?the nuanced patterns seen under different presidential administrations.
In 1984, when Ronald Reagan secured a historic landslide, winning 49 states, his “Morning in America” campaign, filled with optimism and promises of economic recovery, not only captivated voters but also the Russell 1000. Those three months post-election still boast some of the best post-election returns in U.S. history.
U.S. presidential elections are more than just political milestones; they are pivotal events that ripple through global financial markets. With over 60% of the FTSE All-World Index tied to U.S. equities, and the U.S. dollar serving as the world’s primary reserve currency, the outcome of an American presidential election impacts investment flows, trade, and economic policies worldwide. Investors closely watch the lead-up to each election, as anticipated political shifts can spark volatility and influence market sentiment. But what happens after the votes are counted??
In this article, we explore the key market trends in volatility and return surrounding U.S. presidential elections which highlight the impact of the associated uncertainty on markets. We also point out some historical patterns under different presidential regimes although these averages are influenced by many other factors including monetary policy and global events.
As the U.S. election season heats up, markets tend to brace themselves for uncertainty. Historically, pre-election periods have often been marked by heightened volatility, as investors responded to the unknowns surrounding the outcome. The anticipation of possible shifts in policy and economic direction leads to increased market fluctuations, but this turbulence usually begins to settle once the election results are in and a clearer picture emerges.
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