Perspectives on the 2024 Presidential Election

Given the ongoing geopolitical conflict in the Middle East, the war between Russia and Ukraine, and the persistent trade rivalry between the United States and China, it is evident that politics will likely continue to play a prominent role in 2024. Adding to these global events is the upcoming presidential election scheduled for November 5 next year in the United States. Here are some preliminary points to consider:

• The market assigns a 70% probability to Biden becoming the Democratic nominee, an unusually low number for an incumbent seeking re-election. Meanwhile, Trump has an 80% chance of securing the Republican nomination; however, his ongoing legal hurdles could undermine his appeal to unaffiliated voters, potentially reducing his chances of winning the presidency. According to RealClearPolitics, Trump’s odds of success stand at 36.8%, while Biden’s stand at 30%.

• A divided Congress is likely. The consensus suggests that a divided Congress is the most probable scenario after the 2024 elections. Republicans could take control of the Senate due to having fewer seats to defend. However, Democrats are more likely to regain control of the lower House, as some Republicans face challenging re-election campaigns following the ouster of former leader Kevin McCarthy. A divided Congress would necessitate bipartisan cooperation for legislation to pass, reducing the likelihood of significant domestic reforms, such as changes to tax or health policy, or reduced spending on climate change issues.

• Do U.S. presidential elections impact the markets? While these elections hold great relevance for domestic and foreign policy, statistics show somewhat mixed results. The historical average return in an election year stands at 13.1% (excluding 2008 when the global financial crisis emerged). Therefore, investors should not base their decisions solely on this event but consider a broader analysis that encompasses other economic and financial factors.

Total return of the S&P 500 per calendar year in election years since 1928 (% figures)

Note: 2008 was excluded from the analysis, when the S&P 500 fell 37% mainly as a result of the global financial crisis.

Source: UBS