The election is over, but the questions are mounting. We don’t know who will be the next president as of Wednesday morning, but we do know that stocks tend to do well the final two months of an election year. “Once the uncertainty is over, stocks tend to rally in November and December, with November the best month of the year during an election year,” explained LPL Financial Chief Market Strategist Ryan Detrick. “Of course, 2020 isn’t like any other year, and we still could be a ways away from who the winner will be.”
The LPL Chart of the Day shows that the S&P 500 Index tends to do very well the final two months of the year, especially during election years.
The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1928 incorporates the performance of predecessor index, the S&P 90
One of the big takeaways so far from Tuesday night is that the Senate likely will stay Republican, meaning we may have a divided Congress. The chances of higher taxes and more regulation likely took a hit under this scenario. This could be a nice tailwind for stocks, as the S&P 500 historically has done quite well under a divided Congress, up more than 17% on average. Additionally, in years with a divided Congress, stocks have been higher the past 10 times, with 2020 potentially being the 11th in a row.
This election is far from over, so stay tuned to LPL Research as we continue to monitor things!
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