Elections & the Markets

By far the most common question during our recent round of seminars was, “what impact will the election have on stocks?” We addressed this in our ‘What Really Matters’ Podcast this week (click here to listen). Goldman Sachs also provide some data on the historic impact of “wave elections” relative to “normal” elections.

A “wave election”, according to Goldman is one where a political party wins the White House, takes at least one Senate seat and 20 or more House seats. Presidents typically consider this a “mandate” and then often take bold steps to take advantage of the momentum. Wall Street does not like uncertainty and a “wave election” creates it.

The chart below shows the returns for the market following these “wave” elections. Based on the polls today, it is increasingly likely this will be such an election.