“Presidents and political parties want to have a strong economy and stock market in their favor before they hit the campaign trail in the fourth year,” wrote Abbott in an email to CNN.ĭuring the first and second years of presidential terms, the S&P 500 has risen 6.7% and 3.3% on average, respectively, according to the same dataset.Ĭleveland Fed President Loretta Mester to step down next yearįederal Reserve Bank of Cleveland President Loretta Mester is set to retire from her post next year, the bank announced Wednesday. That makes sense when considering candidates’ priorities before voters start lining up at the polls, says Joe Abbott, chief quantitative strategist at Yardeni Research. That’s below the 13.5% gain the index has averaged during the third year of presidential terms since 1931. The S&P 500 has gained 6.2% on average during the fourth year of presidential terms since 1932, according to Yardeni Research. Still, stocks could see a milder rally next year. The S&P 500 index has added 5% in the eight weeks following Election Day through the end of the year in the median election year since 1984, compared to a 2.6% gain during the same period during non-election years, according to Goldman Sachs. “There are fiscal policies that need to be refined, there are regulatory issues where the die will be cast.” “The election is a process that creates clarity on the investing environment for the next two to four years,” said Crate. Investors hate little more than uncertainty. The period right after Election Day tends to be positive for stocks: Darrell Crate, managing principal at Easterly Asset Management, said an election tends to help cut through ambiguity on Wall Street. The New York Fed, which gauges the risk of recessions by tracking the spread of 3-month and 10-year Treasury yields, estimates that there’s a 56% probability that the US economy will tip into a recession by September 2024. Of course, many economists and investors have pared back or axed their recession expectations in recent months, as the labor market and broader economy have proved largely resistant to the Fed’s punishing pace of rate hikes, and markets seem to believe the central bank is done raising rates this year. There’s also the possibility of a recession, as the central bank’s benchmark lending rate hovers at its highest level in 22 years. Some economists warn that the lagged effects of the Fed’s interest rate hikes have yet to take full effect on the labor market and consumers’ pocketbooks. Nothing is certain: Ongoing geopolitical strife in the Middle East, Russia and Ukraine could inject fear into the market and bump up prices for commodities like oil.
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