The Election Cycle and the US Economy: Implications for Markets and Government Policy in 2024.

The Election Cycle and the US Economy: Implications for Markets and Government Policy in 2024.

According to a report from www.cmcmarkets.com, the 2024 US presidential election is approaching and the impact on the economy and the stock market could be significant. Since 1856, election years have coincided in whole or in part with an economic recession. In 87.5% of these cases, the ruling party lost power. When the economy is in recession, the ruling party is very likely to lose power and vice versa when the economy is expanding. Stock markets are also affected by the election cycle and the economic cycle. Before elections there were average returns of 13.5% and 78.3% of the time in positive, while the two years after elections are less reliable and bring lower returns.

The government is currently implementing an expansionary fiscal policy to keep economic activity high ahead of the elections, but this may take a toll later. The budget deficit could rise 23% to $1.695 trillion, the largest since the COVID years, while the cost of the huge U.S. debt could rise to $879 billion in 2023. No powers were renewed in 2000 and 2008 after high interest rates in election years followed by economic recessions.

So the increasing debt and deficit could have far-reaching effects on the stock market and the economy. Investors should monitor developments closely and prepare for a potentially more volatile period.

Source: Federal Reserve and Nasdaq OMX Group data obtained from the Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/A091RC1Q027SBEAa23/11/23