At Extreme Investor Network, we are dedicated to providing you with unique and valuable information on trading and investing. Today, we are diving into what happens to stocks during election week and how it can impact your trading strategy.
Many investors wonder about the behavior of the stock market during election week. Historically, the market has shown a slightly bullish trend during this time. According to Birinyi Associates, the average percentage change for the S & P 500 in the week of the election is up 0.7%, with the index gaining 63% of the time. However, the last 4 days of the week tend to see a slight downturn, with the S & P down an average of 0.4% and up only 58% of the time.
Despite common beliefs, the stock market has not shown significant correlation with which president is in the White House. Nasdaq Chief Economist Phil Mackintosh noted that the presence of a recession has a larger impact on returns, with the average total return for four-year terms overlapping with a recession being 30% for the S & P 500, compared to 62% for those that didn’t experience a recession.
Looking beyond election week, what truly matters for trading is the state of the economy and earnings for the rest of the year. Third quarter earnings have been on the rise and fourth quarter earnings are expected to increase by more than 10%, particularly in the technology sector with a projected 14.6% growth.
Seasonal trends also play a significant role in trading behavior. Goldman Sachs pointed out that this period marks the best trading period of the year for U.S. equities. Factors such as mutual funds and pensions selling off assets by the end of their fiscal year on October 31, corporations resuming stock repurchases after a “blackout” period, and the clearing of risk assets post-election all contribute to a positive trading environment.
In fact, historical data from Goldman Sachs shows that in election years, the S & P 500 has slightly outperformed nonelection years in the fourth quarter. This information can provide valuable insights for investors looking to optimize their trading strategies during this time.
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