As we move forward from an emotional election and gain clarity, we recognize that political divisiveness may not disappear now that the election is over, we hope this allows us to make more progress in bridging our divides.
For many investors, achieving an outcome and removing the cloud of uncertainty is, in and of itself, a positive development. If the economy is on solid footing, as it is currently, stocks have historically reacted positively to election results regardless of outcome. We expect this time to be no different. Historically, the S&P 500 has generated an average gain of 6.5% in the year following Election Day. The election outcome and favorable seasonality will likely help support stocks in the near term, even after the initial bump, as the transition of power takes place.
Those concerned about post-election volatility can also take comfort in the fact that the best six-month period for stocks has begun. From November through April, the S&P 500 has historically generated an average gain of 7.2%. Even in post-election years, returns during these six months have been above average at 5.3%. With the economy and profits growing, inflation easing, and more Federal Reserve rate cuts coming, potential volatility around the transition of power could present a buying opportunity.
In terms of policy implications, the tax cuts enacted by then-President Trump in the Tax Cuts and Jobs Act of 2017 will expire at the end of 2025. President-elect Donald Trump has stated he plans to extend them, though some revenue offsets, including tariff increases, are likely to limit the additional deficit spending. His America-first agenda could cause volatility in international markets, notably China, put some upward pressure on domestic prices through tariffs, and help the more domestic-focused small cap stocks (which are surging this morning). Finally, deregulation efforts may support certain segments of the energy and healthcare sectors as well as financial services and cryptocurrencies.
As we navigate the post-election landscape, we remain committed to helping you find opportunities amid change towards your long-term goals with confidence and clarity.
Please do not hesitate to contact our office with any questions.