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These are the S&P 500 historical returns during election years

Published 08/06/2024, 10:02
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According to analysts, election years can be a time for strong returns in the stock market, with the S&P 500 historically averaging a 10%-20% total return since 1928.

Interestingly, the third year of a president's term seems to be the sweet spot, with analysts noting a median return of 18.08% during that period over the past 95 years. Even the fourth year holds promise, averaging a 9.5% return with a 75% chance of positive gains.

While the full year can be volatile, analysts highlight that the third quarter tends to be the strongest, averaging a 5.21% return, which is roughly 70% of the entire year's average gain. It's important to note, however, that election years since 1928 also see an average annual drawdown of 14.96% for the S&P 500.

Analysts also break down some seasonal trends within election years. In the first half, they state that it is usually range-bound with potentially lower returns.

Meanwhile, it is said to yield stronger returns in the second half, particularly in Q3 and Q4.

When it comes to a Democratic President, the Dow Jones Industrial Average (DJIA) historically underperforms, while sectors like Energy, Healthcare, and Financials might see gains.

For a Republican President, analysts say Cyclicals, Technology, and Communication Services might outperform.

Overall, equities tend to be the strongest, with small-caps historically edging out large-caps. Analysts say value stocks might lag throughout the year but finish stronger than growth stocks.

Looking specifically at 2024, analysts believe their prediction of a High-Level Trading Range (HLTR) aligns with historical election year trends and is likely to continue until the November election. The firm's year-end price objective for the S&P 500 remains at 5,050.

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