US Elections and the Economy: How the Election Cycle Affects Financial Markets

US Elections and the Economy: How the Election Cycle Affects Financial Markets

According to a report by www.cmcmarkets.com, the economy is a key voting driver in the 2024 U.S. presidential election. Statistics show that in the 42 election cycles since 1856, whenever the election year coincided with an economic recession, the ruling party lost power. However, the probability that the ruling party will remain in office is high if the economy is expanding.

In view of the upcoming elections, the government is adopting an expansionary fiscal policy to maintain economic activity. However, this could lead to a recession down the road, as 15 of the 34 recessions in the US began in the year after the election.

The stock markets are also closely linked to the election cycle. On average, stock markets experience strong gains in the year before an election, while the years after the election show less reliable returns. Furthermore, the cost of US debt will rise in the pre-election year of 2023, which will further strain the financial situation.

In the last two elections with interest rates similar to today, there was no change of power: in 2000 there was a change from Bill Clinton to George H.W. Bush, which led to the bursting of the Internet speculation bubble and in 2008 there was a change from Barack Obama to George W. Bush when the economy was already in recession.

According to this information, it is likely that the upcoming US presidential election and the economic situation will have a significant impact on the stock market and the financial industry. It is recommended that you continue to monitor developments closely in order to make informed investment decisions.