S&P 500 Index tend to perform well in the three-month period following an election - MUFG

FXStreet notes that the confirmation of victory for Joe Biden in Pennsylvania on Saturday brought his electoral college vote total past the magic 270 level which prompted all the major media outlets in the US to confirm the election process over – and Joe Biden became President-elect. Economists at MUFG Bank look at the three-month S&P 500 performances around election days and highlight the index rose in eight out of the last ten presidential elections.

“Biden is expected to announce his transition’s COVID-19 task force, consistent with his election promise to focus first on tackling the escalating pandemic. Record infection rates are being recorded in the US, with daily levels surpassing 100K for the fourth consecutive day.” 

“We expect Joe Biden to focus on a fiscal support package focused on COVID-19 which is likely to prove successful even without a ‘blue-wave’ victory. We also expect the Fed to reinforce its loose monetary stance and there is now a real prospect of the pace of QE being increased. These actions will help keep the US dollar under downward pressure. General risk appetite will reinforce that scenario.”

“The US equity markets tend to perform well in the three-month period following an election, no matter who wins. In 8 out of the last 10 presidential elections, the S&P 500 has advanced in the three-month period following election day. 2000 and 2008 were the only two down years. While 2000 was the election in which the result dragged on it was also the period into the 2001 recession while in 2008 it was during the worst period of the Global Financial Crisis. So the omens for risk are very good which means the prospects for the dollar are not great.”