- Political experts spoke at CNBC's Financial Advisor Summit on what investors need to know about the stock market during the 2024 presidential election.
- “The market is focused on the election, given that it will go down in history as perhaps the most consequential and controversial election in the United States in the last 100 years,” said David Wu, CEO of research firm Unbound. It's a little hard to believe that they are trading at such a low price.” .
- Historically, potential election results have minimal impact on financial market performance over the medium to long term, according to analysis by US Bank Wealth Management.
Stock markets have not yet priced in the potential outcome of the presidential election, a rematch between President Joe Biden and former President Donald Trump.
David Wu, CEO of research firm Unbound, said Wednesday during a session during CNBC's Financial Advisor Summit that election years are generally not good for the stock market leading up to Election Day.
But this year is an exception, Wu explained.
“It's up 12% so far this year. This has been the best performing year for the S&P 500.” [in] since the election year [the] “The 1980 election,” Wu said.
Looking back to 1928, the S&P 500 returned an average of 7.5% in presidential election years, compared to 8% in non-election years, according to a March analysis from JPMorgan Private Bank.
“This election will probably go down in history as the most important and contentious election in the United States in the past 100 years. It's hard to believe that markets are trading with the election in mind,” Wu said.
Impact of Biden, Trump on stock market
Wu said that while domestic issues are usually the deciding factor in presidential elections, the upcoming election is likely to focus on international issues.
With both candidates coming into office with a $1 trillion budget deficit, “whoever becomes the next president is going to face some really serious constraints,” Wu said. “In terms of fiscal policy, I don't think there's much difference, frankly.”
Rather, he said the differentiating factor will depend on a candidate's stance on foreign policy.
Wu said defense spending could increase under the Biden administration, suggesting a potential boost for defense stocks.
Emerging markets, on the other hand, “could become more bullish” under the Trump administration, he said.
“I think President Trump will come back with a more transactional approach in dealing with America's adversaries,” Wu said, adding that President Trump has set the first priority as a “starting point” for a negotiating agreement between China and Russia. I believe they will reconsider the phased trade agreement. US and China.
Energy stocks may benefit more under Biden than they did under Trump.
“Everyone thinks Donald Trump is going to be bullish on energy, but that's just not true,” Wu said.
“It wasn't until Biden became president that energy stocks skyrocketed because geopolitical risks suddenly increased,” he said.
Meanwhile, Steve Kornacki, national political correspondent for NBC News and MSNBC, said during the summit that all polls point to Trump being re-elected.
“Donald Trump leads Biden by 1.1 percentage points nationally,” he said, adding that Trump is gaining support among Hispanic and African-American voters, as well as younger nonwhite voters. He said he is doing so.
“That explains why Donald Trump's polls are better now than they were four years ago,” he said.
When markets become volatile during elections
Historically, potential election outcomes have had minimal impact on financial market performance over the medium to long term, according to an analysis by investment strategists at US Bank Wealth Management. They studied market data from the past 75 years and identified patterns that repeat during election cycles.
However, the analysis shows that delays in confirming election winners have had a negative impact on riskier asset classes in previous elections.
“The stock market doesn't like any uncertainty,” says Douglas A. Boneparth, a certified financial planner and president and founder of Born Fide Wealth, a New York City-based wealth management firm.
If things are delayed and there's no “clear winner,” that uncertainty could lead to market volatility, he said, “but it's very hard to predict what the market is going to do simply based on who's going to win.”
Overall, the stock market has done well under both presidents, Vonepers said, adding: “No one is crying about how well the market has done under either administration.”
“You'll probably make mistakes.”
“As financial advisors, we don't often make decisions that revolve around politics, let alone who gets elected president,” Vonepers said. member of the CNBC Council of Financial Advisors.
Therefore, it's in your best interest to stick to your long-term strategy, says Bonepers.
“If you make changes specifically because of one candidate or the other, you're probably going to make a mistake,” he said. “If this is going to disrupt your long-term strategy, what else is going to disrupt your long-term strategy?”
