aggravates Confronting current President Joe BidenOne of the main political themes of 2024 will be the Democratic representative against the Republican representative, who – as many hints – may again be Donald Trump.
US presidential cycle
The closeness of the elections causes the so-called Presidential cycle in the USAWhat should be understood as a certain regularity in terms of the state of the stock market in specific years. It should be noted that the last year of 2023, i.e. the pre-election year, is statistically the best period in this cycle. Historically, the S&P 500 stock index has risen an average of 17.1% in the year leading up to an election. And he was never at a disadvantage during this time. Interestingly, the S&P 500's behavior this year fits this pattern very well—the index is up 22% at the time of writing. Positive.
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It's no coincidence that the weakest year in the current cycle was 2022, when the S&P 500 fell 19.4%. After that, the stock market overeagerly adapted to the rule that The second year after the election is capricious for investors (The decline in the index in 2022 was not only below average, but even slightly below the range of most likely historical results, which we define as the mean minus the so-called standard deviation).
Since the current behavior of the S&P 500 during the Joe Biden era is largely consistent with the presidential cycle, the question is what to expect after 2024, the election year. Historically, it has not been as overtly positive as the pre-election year – the S&P 500 average has been much lower (7.3% compared to 17.1%) and has sometimes declined. Application – There is still room for the stock to rise. However, the result is expected to be significantly lower than in the pre-election year.
Tomáš Hondo, Quercus TFI Senior Economist
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