If there is a script for stock market moves on election day, the S&P 500 is following it.
The
S&P 500
was up by 0.4% in morning trading on Tuesday as voters in Ohio, Kentucky, Virginia, and Mississippi headed to the polls to decide on local races and contentious issues like abortion rights. That is right in line with the historical pattern.
The
Dow Jones Industrial Average
has closed higher on election day nine years in a row while the S&P 500 has closed higher three consecutive times.
From 1970 to 2022, the S&P 500 moved an average of 0.32% on the days when elections were held, usually in the first week of November, according to Dow Jones Market Data. Sixty percent of the time, the index was up.
That might not seem like much, but the S&P 500’s average daily change for all trading days between 1970 and 2022 was just 0.03%. That means stocks are 10 times more volatile on election days than nonelection days.
Much of the volatility can be traced back to a few years with unusually large market swings. But those gyrations usually stem from economic conditions, rather than the fact that people are voting.
On Nov. 4, 2008, for example, the S&P 500 jumped 4%. While that was its biggest election-day swing since the 1970s, it was a fairly ordinary move for an economic and market crisis. In the last three months that year, the index experienced 17 days with gains of more than 2% and 22 days with losses of more than 2%.
The ugliest election day for stocks was in 1987, when the index tumbled 1.9%. That came just two weeks after a spectacular downturn, which many have called the first contemporary global financial crisis, took stocks down nearly 30% from Oct. 13 through Black Monday, Oct. 19,
The market didn’t reach bottom until early December as investors worried about globalization, the U.S. trade deficit, and the weakness of the dollar.
For stocks on election day, normal is good.
Write to Evie Liu at [email protected]
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