On Sunday, President Joe Biden announced that he would drop out of the 2024 presidential election while endorsing Vice President Kamala Harris as the Democratic presidential nominee.
According to Carson Group Chief Strategist Ryan Detrick, that could be problematic for the market.
The chart, which spans from 1950 to today, shows that the second half of the year has historically been rocky when the sitting president does not run for reelection.
The data has limitations. First, the sample size is very small. Second, correlation doesn’t equate to causation. The chart doesn’t take into account macroeconomic statistics, such as the inflation and unemployment rate. Third, it only shows data for one year and does not include performance after that year.
Now That Biden Has Dropped Out, Will This Be a Bad Year for the Stock Market?
Detrick’s chart applies more to short-term traders than long-term investors. For example, a trader might notice that in lame-duck years, the market tends to peak around mid-July and bottom in early December.
For investors, the following chart is more relevant:
Unsurprisingly, the chart shows a solid uptrend starting in 1948, regardless of which party controls the White House. The limitation of a small sample size and the exclusion of macroeconomic factors still apply.
Prediction market Polymarket currently assigns a 64% chance that Donald Trump will win the election. Kamala Harris trails behind at a much lower 33%, while Michelle Obama (who has not indicated she is even considering running) is at 3%.
For Trump, a victory could mean a reduction in the corporate tax rate, benefitting all companies. In an interview with Bloomberg, he noted that he would like to cut the corporate tax rate to 20% and potentially even 15%.
“I liked 20 percent better. I like 15 percent yet better, but I think that would be, you know, that’d be hard,” said Trump.
Overall, the message here is that long-term investors shouldn’t adjust their investment strategy based on the presidential election. Investors should buy quality companies at opportunistic valuations while continuing to monitor these companies for a potential change in their investment thesis.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
