Market indicators point to a potentially tumultuous period for stocks ahead of the next White House election in November 2024. Despite some promising signs in recent weeks, many long-term investors believe that the equity markets should be expected to struggle due to the uncertainty and unpredictability that often follows presidential elections.
Despite the impressive gains logged by the S&P 500 over the past year, there are concerns that the index may take a correction due to the growing tensions and heightened emotions that are likely to prevail in the lead-up to the election. Some market experts see this as a re-run of the 2016 presidential election, which led to a sharp 5.5% correction in the S&P 500.
In the past, presidents have historically enjoyed a slight boost in the stock market during their early years in office, as new policies and initiatives were implemented. However, after the election, returns often slowed or even reversed as the reality of governing set in and market participants began to focus on the challenges rather than the potential benefits.
Given the high stakes and the volatility that comes with the election, some market strategists predict the S&P 500 will experience its toughest quarter of the year, with losses potentially reaching 5-7% in Q4. Others are more sanguine, suggesting the market will largely shrug off the election-related noise and forge higher.
For now, many long-term investors are focusing on the fundamentals, including company earnings, interest rates, and economic growth, as the primary drivers of stock performance. As the election grows closer, they will be keeping a close eye on market trends and sector rotation, as well as eagerly watching for any signs of a correction or a more substantial decline.