Historical Correlation Between Election Years and The Market


As we near 2024, MAI Capital Management investment experts are researching how election years affect the market and economy. Although we can’t predict elections, it’s interesting to study how the economy affects the way people vote.

How Economic & Market Performance Impact Elections

One economic factor has remained consistent for the past 110  years: If a recession starts within two years prior to election day, the standing president has not been reelected. The chart below shows that there have been 12 reelection attempts in the last 110 years when there has not been a recession.

However, this chart tells the other side of the story. In the past, six leaders lost their reelection bids during a recession in their last two terms.

This might be a coincidence, but the recession rule is reliable and could be a sign for candidates to think about.

Will There Be a Recession in 2024?

The chart above shows the history of the interest rate cycles over the past 40 years. Before the most recent series of interest rate hikes – the red line in the chart – there were five others. After four of the five, the economy slipped into recession within two years of the last hike, sometimes sooner. The most recent set of rate hikes and both the fastest and the highest of the group.

While it is not certain, there is a relatively good chance a recession is a possibility next year. And based on the other historical trends we’ve seen; this could shift the momentum of the incumbent’s race.

Four Unique Points About the 2024 Election

Elections are hard to predict, but there are interesting facts that make this upcoming race special.

  1. Both the Republican and Democratic candidates, if it happens, will have been President before – a first since 1892. So, many voters will have a definite opinion about which is right for the job.
  2. Both candidates will be older than any other major candidate.
  3. This would be the first election where one major candidate is under indictment.
  4. There are several third-party candidates who could spell trouble for the incumbent. Those candidates could draw enough voters away to lose important states for him.

The Bottom Line?

2024 could turn into a volatile and unpredictable year, so our team remains sure that the tried-and-true strategy of patience and discipline in the face of uncertainty is the best way to keep portfolios on track and achieve long-term goals. As always, please reach out to your advisor with questions specific to your portfolio.

Please send your questions, comments, and feedback to: Any statement non-factual in nature constitutes only the current opinion of this author which is subject to change without notice. Certain statements are of future expectations and other forward-looking statements are based on management’s current views and assumptions. Any statistics mentioned have been obtained from sources we believe to be reliable, but the accuracy and completeness of the information cannot be guaranteed. Neither the information nor any views expressed should be considered investment, legal or tax advice, or constitute as a recommendation to buy or sell any security, strategy, or product. It should not be assumed that this is a forecast of future events or that any security transactions, holding, or sector discussed where or will be profitable or that the investment recommendations or decisions we make in the future will be profitable. Past performance is not indicative of future results.

We look forward to learning about your financial goals.