Navigating Election Impact on Finance: Market Volatility, Regulatory Shifts, and Economic Policies

With the 2024 presidential election just a few months away, it makes sense for investors to give some thought to the potential impact the results of the election might have on the economy, the financial markets and their portfolios. Past election years have seen varying degrees of market volatility, and we could potentially see some level of volatility as the election day nears.?

Impact on the Markets?

So far in 2024, we have seen record closes in several major indexes including the S&P 500, the Dow Jones Industrial Average and the NASDAQ Composite currently at or near all-time record highs.1?As the election nears and various events unfold, it remains to be seen what impact these events and other related issues have on the markets.?

As an example, the 2016 election season saw a huge drop in the Dow of over 800 points in a single day, only to rebound dramatically the following day.2 In 2020, the markets were quite volatile leading up to the election reflecting the uncertainty that was felt about the potential outcome as well as the impact of the pandemic on the economy.?

Beside the presidential election this year, a number of seats in the House and Senate are up for grabs; the outcome here could have a bigger impact than the outcome of the presidential election.?

While we may experience a level of market volatility directly before and after the election, this volatility will generally be short-lived based on history. Long-term performance and volatility tend to be more impacted by actual policy changes and economic events.?

Regulatory Changes?

What is more likely to have an impact on the markets are any actual regulatory or policy changes made by the new president in conjunction with the House and the Senate.?

Historically, over longer periods like ten years, market returns are fairly similar, whether the Democratic or Republican candidate wins the White House.?

While we do not know what either candidate will do if elected regarding the economy, investors should avoid repositioning their portfolios in anticipation of either candidate winning for president, or either party taking over the House or the Senate.?

Economic Policy Shifts?

Economic policy shifts can impact the markets both in election years and non-election years. A prime example is the Fed’s stance on interest rates. The current indications are for the Fed to gradually lower rates. This is now set as an expectation among many investors. Should the Fed change this policy as a result of the election or for other reasons, it could have an adverse impact on the markets.?

A key issue that will be front and center regardless of which candidate wins the presidency or which party takes control of the House and Senate is the looming sunsetting of the current tax rules that came into effect with the passage of the Tax Cuts and Jobs Act in 2017. Many of the provisions of this legislation are set to sunset after 2025. These include the current lifetime exemptions for estate taxes, lower corporate tax rates and a host of other provisions.??

There are policy differences between the two parties and the presidential candidates in a number of areas including views on the uses and development of fossil fuels on the part of the Republicans and a focus on renewable energy on the part of the Democrats.?

Economic Trends Versus Election Results?

More so than the election results or which party assumes power, economic trends and inflation historically have had a greater influence on the stock market as opposed to who wins the election. This is not to say that the election results and which candidate assumes power does not matter, but the impact may be a bit overblown.?

The lesson here is that investors should focus more on the long-term including their own goals and financial situation rather than worrying too much about who becomes president or which party controls the House and the Senate.?

If you have concerns about what impact the potential outcome of the election might have on your portfolio contact your Wedbush financial advisor to discuss this.??

1: Yahoo Finance S&P 500 ,?Yahoo Finance Dow Jones Industrial , Yahoo Finance NASDAQ ?

2: Forbes ?

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Disclosure?

Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor.???

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