What it looks like in the markets after an election. 

Five Things You Should Know

1. Equity Markets – struggled this week with U.S. stocks (S&P 500) down –2.07% and international stocks (EAFE) down –2.56%. 
2. Fixed Income Markets – fell this week with investment grade bonds (AGG) down –0.85% and high yield bonds (JNK) down –0.72%. 
3. Powell Comments – Markets were a little surprised this week following comments from Fed Chair Jerome Powell that recent performance of the U.S. economy has been “remarkably good” and that “the economy is not sending any signals that we need to be in a hurry to lower rates”. Traders have expected full steam ahead on rate cuts, but this statement alone has seen expectations for a rate cut in December drop from 80% to 60% overnight 
4. Oil Surplus – Latest data from the International Energy Agency suggests that oil supply is expected to far outpace demand going into 2025. While demand remains stagnant largely due to China, supply looks to increase driven by increased production efforts in the U.S. Even if OPEC+’s current supply cuts remain in place, forecasts suggest an excess supply of 1 million bpd. 
5. Key Insight – [VIDEO & ARTICLE] Wondering if you should do something different with your investments due to the recent elections? If we look at history, markets do not favor a specific political party, and your financial plan already accounts for market volatility, so we don’t need to be reactionary based on who wins an election.

Insights for Investors

By Ben Klundt and Daryl Geffken

What it looks like in the markets after an election.

In light of the recent elections, we want to address investor sentiment. We saw increased volatility leading up to the election and lots of transaction activity after, which may lead people to ask “Should we be doing something right now?” There has been a fair amount of short-term/immediate movement in the days after the election, and for some investors, there may be a fear of missing out (FOMO). We’d like to look at a few charts to offer perspective and hopefully provide some peace of mind.  

First, when looking at history, we see that markets do not favor a specific party regarding who holds the Presidential office. Since 1933, stocks have risen, on average, during every party combination of president and congress. We have a sense of what the political landscape will look like, with control of the House not decided at the time of this writing. Looking at data, a divided congress has produced the greatest gains, regardless of what party sits in the White House. A fully Republican White House and congress is on average a percentage point behind.  

Next, U.S. stocks have generally done well regardless of election results. In fact, since 1933, the average annual return for the S&P Index ranged between 11% and 14%, and in the last forty years, the only time to register a negative return one year after Election Day was during the financial crisis of the early 2000s, which was marked by the bursting of the dot-com bubble, the September 11th attacks, and the resulting stock market crash.  

Another thing to consider is the power of momentum. Currently, we are experiencing a strong equity rally. The S&P Index has gained more than 40% over last year. This is important because a study by the Leuthhold Group revealed that in the 21 previous instances when the index was up more than 30%, or more, over a 12-month period, only twice did the economy stall in the next year. That means that 19 out of 21 times the market continued its upward trend.

That being said, it’s also important to understand the typical four-year Presidential cycle – again, regardless of which party is in power. Markets typically do well over this period, but as you can see, the second year tends to lag the first. Markets pull back from time to time, and that presents its own opportunity, and is a reason to remain in a fully diversified asset allocation. As much as people want to predict the next opportunity, it’s important to remember how varied market returns can be, and the ability to predict that performance is extremely difficult, even for the savviest full-time investors. Just look at the variance of performance over the last 20 years. This is why it is important to set a variety of strategies together to help smooth your portfolio’s journey and capitalize on opportunities while protecting against drastic downturns.  

To come full circle. If you’re wondering what to do, we do not want to be reactionary. Harken back to your financial plan and remember that it assumes such times as these – positive and grossly negative times in the stock markets. Remember your strategy and continue to carry a diversified portfolio. We continue to be proactive and perform our due diligence on your behalf through the filter of your plan and investment horizon. As we often say, “We do serious things with serious money,” and your financial success is something we treat with care. If you ever find yourself worrying or needing clarification, give us a call, we’re more than happy to help you talk through your plan. 

Have a great weekend.  

Daryl and Ben and the rest of the Team at Ten Capital  

Data, Just the Data

• U.S. Retail Sales – rose 0.1% month-over-month in October and saw an upward revision to 1% in September. Year-over-year growth now sits at +2.7% 

• U.S. Jobless Claims – initial claims fell by 4,000 last week for a total of 217,000 and the lowest reading since May. Ongoing claims also fell by 19,000 to 1,873,000. 

• U.S. Industrial Production – fell 0.3% in October with a major aircraft producer’s strike impacted output. Manufacturing output, which makes up 78% of total production, fell 0.5% 

• China Retail Sales – rose 4.8% year-over-year, coming in a full percentage point above expectations. During the first 10 months of the year, sales for the region have grown 3.5%  

• Eurozone Industrial Production – fell 2% in September from the previous month, and now sits down -2.8% year-over-year