How will U.S. Election Impact Dow Jones Industrial Average (DJIA) and S&P 500?
With the U.S. presidential election drawing to a close, some stock market analysts are predicting bounce-backs in the event of a Hillary Clinton win, and market dives in the event of a Donald Trump presidency.
As of last Friday, the S&P 500 had nine straight days of losses. While the decline has only been a modest three percent, there hasn’t been a consecutive losing streak for the S&P 500 this long since 1980.
The Dow Jones Industrial Average (INDEXDJX:.DJI) was on the decline last week as well, but has seen a spike on Monday, making up for the losses from the previous week. The Dow Jones Industrial Average (DJIA) is back up around two percent. Both the S&P 500 and the DJIA are expected to perform better following a Clinton win on Tuesday. (Source: “Wall Street reacts: Here’s what the markets will do after the election,” CNBC, November 7, 2016.)
JPMorgan Chase & Co (NYSE:JPM) analysts are predicting a three percent bump in the S&P 500 to 2,150, and they said that European and emerging market stocks should rise three to four percent in the event of a Clinton victory.
“We believe that if Trump wins, markets are likely to fall further — one should not use the Brexit template where stocks bounced quickly,” said the JPMorgan note, referring to the rebound shares made shortly after the U.K.’s referendum vote to leave the E.U. (Source: “How US markets react the day before a presidential election,” CNBC, November 7, 2016.)
If history is any indicator, both the DJIA and the S&P 500 are expected to rise on the day before an election, according to Jeffrey Hirsch of the Stock Trader’s Almanac. Both the Dow Jones Industrial Average and the S&P 500 have risen on the day before an election 81.3% of the time since 1952, climbing 0.41% and 0.33%, respectively. Election day has also historically proved to be positive for markets, with the DJIA rising on average by 0.24% and the S&P 500 by 0.22% on election day. (Source: “Ibid.)
While there’s been a lot of speculation by pundits about what a Trump administration could mean for markets and investors—who scare easy in the face of volatility (and Trump is nothing if not volatile)—some fantastic graphs by Quartz detail how little, generally speaking, election days often affect the market.(Source: “Financial markets are just as stressed out about the US election as everyone else,”Quartz, last accessed November 7, 2016.)
Check out those graphs and have your fears soothed that the world and the market will (probably) not devolve into total chaos following the U.S. presidential election. There’s no guarantee that this election will follow the trend, of course. After all, nothing in this election has been predictable. And that means some investors are shaking in their proverbial boots about the possibility that 2016 could be different.
The Brookings Institution, a non-partisan think tank, predicts a 10% to 15% market loss. (Source: “What do financial markets think of the 2016 election?” Brookings Institution, October 20, 2016.)
The Financial Times doesn’t agree with that figure, but also it projects significant losses. (Source: “So how would markets react if Donald Trump wins?” Financial Times, November 4, 2016)
It’s looking like the sky probably won’t cave in, no matter who emerges the winner on Tuesday. The Dow Jones, the S&P 500, and the rest of the stock market will likely be fine. But, then again, it never hurts to be prepared. I’m just happy that this long slog of an election season is nearly done, dead, over.