Mixing politics with the stock market can sometimes result in irritated readers. But with the presidential election less than 100 days away, we can’t afford to ignore its impact…
Earlier this week, Bespoke published the chart below that highlights just how intertwined the upcoming election and the stock market have become – especially as the battle between former President Donald Trump and Vice President Kamala Harris gets tight.
For the first time in months, the odds of a GOP victory (Trump winning the presidency) have fallen from 70% to 50%. The stock market has dropped as well, which shouldn’t be a huge surprise. Since mid-April – when the odds of a GOP victory and the stock market bottomed – the two have been moving hand in hand.
Regardless of what side of the political aisle you find yourself on, it’s clear that the market views a second Trump presidency as a positive for stocks.
That makes sense. Trump has discussed lowering taxes for both individuals and corporations. And he has also said that he would like to see less red tape in the government – another positive in the mind of investors.
Harris hasn’t shared much about her four-year plan for the economy. So it’s impossible to know for sure whether it would be good or bad for the stock market. Only time will tell.
I’ve talked a lot about investor fear this week. The CBOE Volatility Index (VIX) recently hit its fourth highest level since the mid-1980s. And another sentiment gauge from the American Association of Individual Investors (AAII) indicates that investors haven’t been this bearish since the bull market began last October.
I believe a variety of factors have investors on edge – including unknowns in the stock market, the U.S. election, global geopolitics, and life in general. Statistics back this up. And my boots-on-the-ground research over the last six weeks living on the road in several countries confirms it.
People are flat-out frustrated.
The biggest question I have been getting asked is… when will it all change?
Unfortunately, I don’t expect a large shift in sentiment until after the November presidential election. So anticipate continued volatility in stocks as investors base their investing decisions on factors outside of the actual market.
The polls and headlines will go back and forth as to whether Trump or Harris is leading the race. That will likely result in both bullish and bearish moves in stocks. Plus, geopolitical headlines will continue to directly impact the markets.
The bottom line is that as long as investors have a laundry list of topics to lose sleep over, stocks will remain volatile.
The good news is that this is nothing new. Since the dawn of time, the world has weathered situations that seemed impossible at the time – and it has always come out on top. The only difference today is that the specific worries aren’t the same as they were a century or even five years ago.
The stock market will make it through the current pullback.
And along the way, opportunistic investors will be given plenty of chance to buy into great long-term companies at a discount.
Here’s to the future,
Matt McCallEditor, Market Insights
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