Equity Market Tends to Perform Well After Election Day

Yes, there was a presidential election in the U.S. this past week and up until election day on Tuesday, the uncertainty around the election seemed to weigh on the markets. With Joe Biden now leading in the electoral count, some of the uncertainty seems to be behind the market and the S&P 500 Index rallied 7.13% in the week ending 11/6/2020. President Trump and his team is indicating they will challenging some of the ballots counted in swing states so this could lead to some market uncertainty near term.

Also, a potential factor the market will need to digest is the composition of Congress. Historically, the equity market likes a divided government, i.e., different party occupying the White House and one branch of Congress. The state of Georgia will have two runoff senatorial elections in early January, which will decide which party controls the Senate as the House seems to be in Democratic control. Nonetheless, election day has now passed and the S&P 500 Index generally performs well following the election as some uncertainty has been alleviated.

The equity market is unlikely to be straight up from here, but some election uncertainty is in the rearview mirror. Investors will need to be cognizant of potential headline risk until the Electors meet in their respective states and cast their Electoral College votes on December 14.