With the US Presidential elections due in November 2024, investors can expect additional uncertainty, as per JPMorgan Asset Management. While analysing the possible scenario of the stock market after the election, Meera Pandit, Global Market Strategist at JPMorgan AM, cautioned, “Although uncertainty can create opportunity, investors often make their worst mistakes during uncertain times, which can sometimes take years for portfolios to recover from.”

Pandit tells investors not to let politics overwhelm their investing decisions. “Investors who allowed their political opinions to overrule their investing discipline may have missed out on above-average returns during political administrations they didn’t like,” explained the Global Market Strategist while citing a survey from Pew Research Center.

According to JPMorgan AM, returns are usually lower during election years while volatility is on the higher end, as markets are averse to election-related uncertainty. The asset manager also highlighted that markets tend to be more volatile ahead of the election. However, after an election, the stock market has more clarity with its focus back on fundamentals.  

Furthermore, Pandit warned against the strategy of market timing around elections. “Some investors are eager to sit on the sidelines until election uncertainty passes but risk missing subsequent rebounds, which typically occur faster than investors can get back into the market,” she explained.

Most investors want to know the stock market’s performance after an election under different governments or presidencies. “Monetary policy, fiscal policy, economic growth, labour markets, corporate profits, and valuations are much better indications of future returns,” opines the asset manager. Hence, the economic context, not the political, is more relevant for studying historical market environments and returns.

JPMorgan AM points out how the economy and markets have always been strong despite the political backdrop. “It would be easy to conclude that the economy performs better under Democrats and the market performs better under Republicans, but the sample sizes are relatively small,” says Pandit.

In conclusion, JPMorgan AM states that the economy’s and stock market’s immediate performance after elections cannot be directly ascertained. Thus, Pandit says it is challenging to design a strategy around the election cycle or the anticipated political result. Instead, she suggests, “…investors should let their long-term goals, time horizon, and risk tolerance dictate their portfolios, not the political cycle”. 

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