November 6, 2024

With President Trump winning the election as the 47th president, markets are likely to see heightened volatility, especially in the immediate aftermath. This outcome brings renewed focus to the Presidential Election Cycle Theory, which suggests that U.S. stock markets historically perform strongest in the third year of a president's term. Typically, presidents seek to establish economic stability and growth leading up to re-election campaigns, creating favorable conditions that boost investor confidence and, often, market gains.

Historically, the S&P 500 has posted its highest average returns in the third year of a presidency, as policies stabilize or accelerate with an eye on election dynamics. Investors may anticipate similar market momentum in the coming cycle as political leaders prioritize economic growth to secure voter support. However, it’s important to note that, while this theory offers useful historical patterns, it doesn’t guarantee outcomes. Geopolitical shifts, policy changes, and unexpected events continue to shape market performance beyond election cycles.

Currently, the Dow Jones Industrial Average (DJIA) is trading around 43,464, up approximately 3.68% Dow Jones - Search  following the announcement of Trump’s election victory. This surge reflects investor optimism around potential regulatory and tax policies that could benefit sectors like banking, energy, and tech. However, investors should monitor Federal Reserve actions closely, especially regarding interest rate adjustments, as well as trade policies with China and potential shifts in tariffs. These factors are expected to shape market sentiment and stability in the near term.

For long-term investors, it’s vital to stay focused on overall financial goals, maintain perspective, and adhere to a steady plan, regardless of election-driven market fluctuations. This disciplined approach helps navigate uncertainty and positions investors to benefit from the long-term growth potential in the market.

Jennifer M. Snyder

Financial Advisor

E-Mail: jsnyder@brightonsecurities.com

Direct: 585.340.2207

Presidential Election Cycle Theory: Meaning, Overview, and Examples