The 1948 presidential election was the first official federal Election Day
Subscribers to Chart of the Week received this commentary on Sunday, July 28.
Riding the coattails of election season buzz, especially after the developments of the past few weeks, today we are diving into data on S&P 500 Index (SPX) returns from the end of July through election day, going back to 1948. While we anticipated a packed season of election news, there’s certainly been no rest for the registered voter after an attempted assassination on former President Donald Trump, current President Joe Biden stepping out of the re-election race, and current V.P. Kamala Harris standing in to take his place.
Previously, I looked at the major indexes and what we might expect to see from stock performance amid another volatile election year, as well as an updated version of our January data and the popular sectors to watch during this time frame. This was narrowed down to the second-half performance of stocks during election years, and it was noted that the banking sector took eight of the 25 spots on Senior Quantitative Rocky White’s list.
The 1948 presidential election was the first official federal Election Day (Tuesday after the first Monday in November), and below, White has pulled data from '48 until now, to compare the performance of the S&P 500 when there was and was not an incumbent candidate.
Per White, the SPX has tended to do much better when there was an incumbent candidate in the race. The first table summarizes the returns from August through Election Day with and without and incumbent. There have been 11 instances of an incumbent candidate running, positive an impressive 82% of the time with an average return of 4.4%. During the eight times without an incumbent candidate, the average return was -2.5%, positive just 38% of the time. The gap between the returns is clear, and to dig even deeper, let’s take a look at the specific returns for each of the 11 candidates in the second table below.
The second table shows the returns for each of the election years along with the incumbent candidate. The candidates associated with the largest returns for August through Election Day were Reagan in 1984 and Clinton in 1996, respectfully. On the flip side, the biggest deficits were seen during Obama in 2008 and Eisenhower in 1956.
With July already etching off its last days on the calendar, August is upon us, meaning despite recent candidacy changes in the race, things are picking up at a rapid pace. Poll results project a myriad of possibilities for November’s outcome, but one thing for sure is that the race will be tight. As Harris answers the Democratic Party’s call for a younger, more "viable" candidate, the long-term effects of the Trump Administration keep a firm grip on many voters. Certainly, history seems to continue to be writing itself, and only time will tell how this potentially historic election will impact trader portfolios between now and Tuesday, November 5.