What Does a Trump Presidency Mean For Investors?
On 4th November, the day before election day, there was a huge spike in the CBOE put/call ratio which suggests lots of hedging ahead of the election.
After the elections on 6th November 2024, the S&P 500 had the best post-election single-day return of 2.5% since 1928 and a three-day gain of 3.6%, ranking third best after 1932 and 2004.
In the chart above, each dash represents a month with the coloured dashes representing presidential election months. If a democrat wins the election, it is represented by a blue dash; a red dash is shown when a republican wins the white house.
Looking at the distribution of monthly returns shows us that most election months have not produced extreme returns and there is no reliable pattern as to whether democrats or republicans are better for stock market returns.
Expectations of presidential elections are one of many inputs that go into market prices. The data suggests that making investment decisions based on how one might anticipate elections to unfold can lead to costly mistakes — for example, getting out of stocks based on a forecast and missing the best single-day post-election return since 1928.
Investors need a scientific and robust investment philosophy that gives them the confidence to stick through booms and busts, elections and other events which capture our attention.
Because like the adage says, “If you don’t stand for something, you’ll fall for anything.”
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