The S&P 500 is up about 0.5 percent in Tuesday after a strong performance
Benzinga took a look back at how the S&P 500 reacted to each of the past eight elections in its first week of trading. If history is any indication, here’s a look at what traders can expect starting Wednesday.
Regardless of which candidate comes out on top, the market has certainly reacted strongly to recent elections. Since 1984, the S&P 500 has averaged a one-week return of -2.2 percent following Election Day.
In terms of volatility, the average magnitude of the S&P 500’s move has been 3.5 percent. In fact, the S&P 500’s -0.3 percent post-election move in 1992 is the only time the stock market hasn’t moved at least 2.1 percent in one direction or the other in the week following Election Day.
Digging a bit deeper, the market’s knee-jerk election reactions have been worse when Democrats are elected than Republicans. The S&P 500 has averaged a -3.1 percent one-week return following the last four Democratic victories and a -1.3 percent return following the last four Republican victories.
Ironically, the stock market has historically performed
Another key factor for traders is whether or not the newly-elected president represents the incumbent presidential party.
Since 1984, the S&P 500 has reacted much more favorably to election winners that represent the same party as the previous-term president. The one-week market return following incumbent party victories is -0.7 percent, but a change in party has resulted in an average -4.7 percent one-week return.
The best news for long-term investors is that the stock market has historically performed well in the long run regardless of which party is elected. The S&P 500 has delivered gains during 15 of the last 18 presidential terms.
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