FISCAL FRIDAY / HOW STOCKS FARE IN A PRESIDENTIAL ELECTION YEAR.

GUEST BLOG / By Edward Jones & Co.--The 2024 U.S. presidential election will be top of mind for many investors as we move through the year. While political uncertainty could drive short-term bouts of volatility, history shows the stock market tends to perform well in election years regardless of political outcomes. 

 Stocks have fared well in election years — In the past 18 elections going back to 1952, the S&P 500 has returned an average of 7.5% in the final nine months of an election year, and returns have been positive 83% of the time. This compares to an average gain of 6.8% in the final nine months of all years dating back to 1952, with returns positive 72% of the time. We acknowledge that this year’s election has the potential to be contentious, which could spur short-term market volatility. However, one unique aspect of this year’s election is that both of the likely candidates have already served a term in office. To that end, markets have performed well under both Donald Trump and Joe Biden, with the S&P 500 returning roughly 16% per year from 2017–20 and 12.7% per year from 2021 through the end of March 2024. Market familiarity with both candidates should provide investors confidence that stocks could continue to perform well under either party. 

 Economic growth and fundamentals are more important drivers of market returns — Over the long term, we believe economic growth and fundamental variables such as corporate earnings and interest rates have a more powerful influence on markets than politics. To that end, we expect the economic backdrop to remain supportive to equity markets in 2024. Our view is for economic growth to slow from above-trend levels, but remain positive; the Fed to begin cutting rates in the second half of the year; and corporate profit growth to accelerate in 2024. In our view, this backdrop creates a positive environment for equity markets, particularly in the U.S., regardless of who wins the election. 

 ACTION FOR INVESTORS: As we approach election day, we recommend using pockets of market volatility spurred by political uncertainty as an opportunity to add to quality investments in line with your long-term goals. 

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 Edward Jones is the investment advisor of record for PillartoPost.org, daily online magazine style newsletter,