The US stock market has outperformed typical election year trends in the lead-up to the 2024 presidential election, with the S&P 500 posting significant gains.
The index has surged 22% in the year-to-date, marking the best performance in nearly 90 years of election cycles, according to an analysis by U.S. Global Investors (NASDAQ:GROW).
The S&P 500 averages just an 8.1% gain during election years dating back to 1936, the analysis showed.
Frank Holmes, CEO of U.S. Global Investors (NASDAQ:GROW), credits central bank easing for providing a stabilizing force in the markets.
“Election years often bring volatility as markets grapple with the uncertainty surrounding potential changes in leadership, but 2024 has proven to be an outlier,” Holmes said.
“Central bank easing has provided a powerful tailwind, helping to stabilize markets and lift stocks higher, despite lingering concerns over who will occupy the White House next year.”
A key shift came when President Joe Biden withdrew from the race in July, removing some of the uncertainty around the election.
“This is no longer an election that is directly a referendum on an incumbent,” Rob Haworth, senior investment strategy director for U.S. Bank Wealth Management, commented.
“Market uncertainty often centers around whether an incumbent will lose, but come January 2025, we know there’s going to be a change of President one way or the other.”
Services power gains
The services sector, which accounts for nearly 80% of US GDP, has been a major driver of the market’s performance, expanding for 20 consecutive months.
Holmes pointed to growing consumer demand and lower interest rates, which have made borrowing more affordable for businesses and households alike.
“Despite some moderation from the 14-month high we saw in August, the sector looks strong, providing a foundation for economic stability,” he said.
On the flip side, manufacturing continues to struggle amid slowing domestic and international demand, exacerbated by election-related uncertainty.
Companies are holding off on major investments until there’s more clarity on the political landscape, Holmes explained.
Looking towards the year-end, the market is positioned for further gains, according to CFRA Research.
A positive performance in September during election years since 1945 has led to a gain in the following October nearly 80% of the time, the firm said.
Factors seen contributing to continued stock market gains during the fourth quarter include China’s recent stimulus program, easing inflation, and the potential for two more Federal Reserve rate cuts totalling 50 basis points to 75 basis points before the end of the year.