Analysts say election years can be a time for strong stock market returns, with the S&P 500 historically averaging 10% to 20% total returns since 1928.
Interestingly, the third year of a president’s term seems to be the sweet spot, with analysts noting an average return of 18.08% over the past 95 years during that period. Even the fourth year is promising, with an average return of 9.5% and a 75% chance of positive gains.
While the entire year can be volatile, analysts highlight that the third quarter is typically the strongest, with an average return of 5.21%, which is roughly 70% of the full year’s average gain. However, it is important to note that election years since 1928 have also seen an average annual decline of 14.96% for the S&P 500.
Analysts also analyze some seasonal trends within election years. In the first half they state that it usually concerns a bandwidth with potentially lower returns.
Meanwhile, it would deliver stronger returns in the second half, especially in the third and fourth quarters.
When it comes to a Democratic president, the Dow Jones Industrial Average (DJIA) has historically underperformed, while sectors like energy, healthcare and financial services could potentially post gains.
For a Republican president, analysts say Cyclicals, Technology and Communication Services may perform better.
Overall, equities tend to be the strongest, with small caps historically outpacing large caps. Analysts say value stocks may lag throughout the year but finish stronger than growth stocks.
Looking specifically at 2024, analysts believe their forecast of a High-Level Trading Range (HLTR) is in line with historic election year trends and will likely continue through the November elections. The company’s year-end price target for the S&P 500 remains at 5,050.
