Dec 11, 2024 | 5 min read
Top Line Summary
Markets React to Policy Expectations: Elections often drive equities and bonds based on anticipated fiscal and economic policies.
Surprises Fuel Volatility: Unexpected outcomes like in 2016 and 2000 tend to shake markets, while predictable results calm investor nerves.
Broader Context Matters: Economic conditions, like the 2008 crisis or the 2020 pandemic, can overshadow election-specific reactions.
Financial Markets Reaction to U.S. Presidential Elections Since 2000
2024: Biden vs. Trump
Trump’s 2024 win brought a big reaction from the markets. The S&P 500 jumped 2.5% the day after the election, fueled by optimism about pro-business policies like tax cuts and deregulation. That momentum didn’t stop, with the index gaining 5.7% for the month and crossing the 6,000-point milestone on November 11—just nine months after breaking 5,000. Clearly, investors were feeling confident.
On the bond side, 10-year Treasury yields rose to 4.43% right after the election as markets priced in inflation and higher government borrowing for expected stimulus plans. Yields were all over the place for the rest of November, peaking at 4.50% before ending lower at 4.18%. It was a mix of optimism and caution.
S&P 500 Index and US 10-year Treasuries yield performance before and after the 2024 US Presidential Elections
2020: Biden vs. Trump
The 2020 election had its own drama, but markets didn’t seem to mind. Initially, investors rallied around the idea of a divided government, assuming Republicans would hold the Senate and limit any big tax hikes or regulatory changes. The narrative shifted later, but in those first few days, markets liked the idea of gridlock.
Then came the real boost: Pfizer’s vaccine announcement in early November. With strong efficacy numbers, the news offered a clear path out of the pandemic, sending stocks even higher. The S&P 500 climbed as optimism about recovery mixed with post-election relief.
S&P 500 Index and US 10-year Treasuries yield performance before and after the 2020 US Presidential Elections
2016: Trump vs. Clinton
Trump’s surprise win in 2016 shook markets at first, but things quickly turned positive. A Republican sweep of Congress opened the door to fiscal stimulus and tax cuts, which got investors excited. Treasury yields spiked—up 20 basis points the day after the election and climbing steadily to end the year at 2.44%, compared to 1.85% on election night.
The S&P 500 also rallied as investors bet on deregulation and pro-growth policies. The surprise factor was big, but once the shock wore off, markets embraced the potential for a more business-friendly environment.
S&P 500 Index and US 10-year Treasuries yield performance before and after the 2016 US Presidential Elections
2012: Obama vs. Romney
Obama’s re-election didn’t catch anyone off guard, but markets still reacted negatively. The S&P 500 dropped over 3% in the two days after the election, mostly due to fears about the “fiscal cliff”—automatic tax hikes and spending cuts that were set to kick in unless Congress acted. Investors worried about legislative gridlock, especially since Republicans kept control of the House.
On top of that, Europe’s debt crisis was flaring up again, with widening bond spreads in countries like Italy adding to the gloom. While the election result was expected, the broader economic uncertainties spooked investors.
S&P 500 Index and US 10-year Treasuries yield performance before and after the 2012 US Presidential Elections
2008: Obama vs. McCain
The 2008 election happened in the middle of the Global Financial Crisis, so the market reaction had less to do with Obama’s win and more with the dire state of the economy. The S&P 500 dropped over 10% in the two days after the election, thanks to weak jobs data and worsening economic conditions.
At the time, markets were reeling from events like the collapse of Lehman Brothers and emergency rate cuts by the Fed. While Obama’s win was no surprise, it barely registered in a year dominated by financial turmoil.
S&P 500 Index and US 10-year Treasuries yield performance before and after the 2008 US Presidential Elections
2004: Bush vs. Kerry
Bush’s re-election brought a sense of relief to markets. Investors liked the idea of continuity, and the S&P 500 rallied 2.7% in the two days after the election. Strong economic data, like better-than-expected ISM numbers and jobless claims, added to the positive sentiment. With no big surprises in the result, markets welcomed the stability of a second Bush term.
S&P 500 Index and US 10-year Treasuries yield performance before and after the 2004 US Presidential Elections
2000: Bush vs. Gore
The 2000 election was a rollercoaster. The Florida recount dragged on for over a month, keeping the outcome in limbo and spooking investors. The S&P 500 fell 8% in November, its worst month of the year, as uncertainty weighed heavily.
During the chaos, 10-year Treasury yields dropped from 5.86% to 5.26% as nervous investors shifted to safer assets. Things finally calmed down when Gore conceded on December 13, but the prolonged uncertainty left a mark on the markets.
S&P 500 Index and US 10-year Treasuries yield performance before and after the 2000 US Presidential Elections
The Bottom Line
Presidential elections often trigger market swings based on policy expectations and investor sentiment. While individual elections bring unique drivers, long-term trends show markets responding more to the broader economic backdrop than the politics of the moment.
At Israilov Financial, we closely follow economic and political developments to ensure we stay up-to-date and effectively manage client assets. We take pride in ensuring all client inquiries on major developments are properly evaluated and addressed. Our transparent, flat-fee structure combined with our commitment to timely market insights helps you navigate market transitions with confidence. Ready to optimize your investment strategy? Schedule your complimentary discovery meeting today.
IMPORTANT DISCLAIMERS
Past performance is no guarantee of future returns
The graphs and charts in this commentary are for illustrative purposes only and not indicative of any actual investment. Index returns do not reflect any fees, expenses, or sales charges. It is not possible to invest directly in an index. Stocks are not guaranteed and have been more volatile than other asset classes. Historical returns were the result of certain market factors and events which may not be repeated in the future. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgement in determining whether investments are appropriate for clients.
This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities.
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The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Israilov Financial LLC cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Israilov Financial LLC does not provide tax or legal advice, and nothing contained in these materials should be taken as such.
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