The president cycles around the White House, but Wall Street is so far unperturbed about the next leader. Despite looming uncertainty over who will occupy the Oval Office by the end of the year, the banking giants are bullish on the market outlook and expect it to rise regardless of who is sworn in in January.
the analyst said luck He said the whims of incoming politicians are just “background noise” for now, especially in the early stages of an election, adding that they are more focused on continued economic performance than on their proposed policies.
With important political events on the horizon, business giants will inevitably have to take stock.
Jamie Dimon CEO JP Morgan Chase for example, told CNBC At Davos, he said President Trump was “sort of right” on certain issues.
The man who previously described himself as “hardly a Democrat” has clashed with Trump but warned President Biden not to fire MAGA supporters, adding: Slightly? “
Similarly, Sam Altman, CEO of ChatGPT maker OpenAI, said that while “a lot is at stake” in the upcoming election, he believes AI and America in general will be “okay.” Stated.
In an interview with Bloombergalso at Davos, Altman said, “I think elections are a big deal. I believe that no matter what happens in this election, America will be OK.”
But as the year draws to a close and the noise, tension and uncertainty surrounding America’s highest office increases, Wall Street experts are offering similar advice: Don’t base your portfolio on politics. Thing.
it’s too early to worry about it
There’s a lot to get investors excited about at the moment. When will the Fed lower the base interest rate??Will inflation recover?maybe Geopolitical tensions cause economic turmoil?Will employment be stable? And will consumers remain strong?
Some analysts said they were not paying much attention to political maneuvering at the moment, although the election could shake up many of these factors.
“The market doesn’t really care at this stage,” said Paul Donovan, chief economist at UBS Global Wealth Management. “Investors have not priced in anything about the outcome of the November election, and the situation remains complicated.
“There is an assumption that former US President Donald Trump will win the Republican nomination, and what is happening at the moment is just noise.”
As the conversation continued, luckDonovan’s UBS colleague Tom McLoin said the market would stabilize until the situation becomes clearer.
McLoughin, head of Americas fixed income and municipal securities at UBS, added that markets will become more “obsessed” with election news from the summer onwards.
goldman sachs Similarly, I keep my cards close to my chest.
In a memo sent to luck This week, analysts Dominic Wilson and Vicky Chan wrote that while the election could be a “major market event”, it is difficult to predict the outcome at this stage.
year-end meeting
As with many economic issues at the moment, analysts disagree on the details, but there is broad agreement on the economic trajectory.
For example, economists It is widely agreed that it is a soft landing. This is likely to happen sometime in 2024, and the Fed is expected to start lowering interest rates around the middle of this year.
And while bulls and bears have divided the market, economists generally agree that markets will rise once political uncertainty ends in the fourth quarter of 2024. There is.
Steve Satmeyer, chief equity technical strategist at Bank of America, said on a bullish note that the S&P 500 index could break above the 5,000 mark.
According to his calculations over 24 cycles from 1928 to 2020, SPX rose 75% of the time, with a “solid” average return of 7.5%.
However, its performance varies throughout the year. luck The S&P 500 suffers from January to May, “punctuated by a summer rally from June to August and a post-election relief rally from November to December, ahead of a much stronger return for the rest of the year.” It is outlined that there are many cases.
From a long-term secular bull market perspective, he said, “The 2022-2023 pattern and secular bull market roadmap chart suggest that the S&P 500 will take some time to break above 5,000 in 2024. ” he added.
citygroup Alex Saunders, head of quantitative global macro and asset allocation at Citi Research, also expects stock trading to be strong in 2024, especially as incumbents like Joe Biden run for office. assets tend to trade well in election years, he told Fortune.
We often expect asset prices and historical returns to return to their long-term trajectories, and also mean reversion after elections.
Meera Pandit, global market strategist at JPMorgan, says her data set from 1932 to the present shows that the average return for the S&P 500 was 6.2% in election years versus 9.6% in non-election years. As such, the outlook is not very bullish.
However, Pandit agreed that investors can expect some optimism in the fourth quarter.
“Markets tend to be more volatile in the lead-up to elections, but once Election Day is over, that source of uncertainty dissipates and markets begin to refocus on fundamentals, regardless of the outcome.” she wrote in her note.supplied to luck.
“In fact, going back to 1936, the median return for the first three quarters of an election year was 1.9%, compared to 3.1% for the fourth quarter.”
portfolio and politics
Despite this trajectory, the exceptions in Pandit’s data are 2000, when the outcome was finally decided by the Supreme Court, and 2008, when the first bubble of the financial crisis was emerging. Analysts advised investors to focus on the long game instead. Making portfolio decisions based on politics.
“Uncertainty can create opportunities, but investors often make their worst mistakes during times of uncertainty, and it can take years for their portfolios to recover,” he wrote.
“Political opinions are best expressed in opinion polls, not portfolios. One golden rule for investors to follow is to not let your feelings about politics control how you think about investing.”
Despite voters often believing that the economy would be better off under their preferred candidate, which could influence their choices, Pandit said this is unlikely to be true. It is outlined as follows.
For example, under both the Obama and Trump administrations, the S&P returned about 16%.
As such, “macro conditions such as ultra-low interest rates were a more influential driver of above-average returns over the period than the policy prescriptions espoused by each president,” she added.
Vanguard Research casts doubt on the commonly held notion that elections cause market volatility. Looking at the 100 days before and after elections from 1984 to 2020, volatility was 16.5% and 15.9%, respectively, both lower than the overall 17.9% for this period.
JPMorgan is a little more cautious about volatility, but echoes Vanguard’s advice on how investors should navigate elections, saying, “While it’s natural to be concerned about elections, historical data shows that elections can affect portfolios and markets.” “This shows that it is not a problem for us,” he said.
This story was originally Fortune.com