Election Day and your investments: What to expect
Election Day 2024 is here, and the markets are feeling the pressure. After a long streak of gains, the S&P 500 slipped for two weeks in a row, with October marking its first monthly drop since July. Political uncertainty is adding fuel to market volatility, and what happens next may depend heavily on Tuesday’s results.
Why Are Yields Rising with a Weak Jobs Report?
Last week’s jobs report was grim. October saw only 12,000 new non-farm payroll jobs—far below the monthly 125,000 to 150,000 needed to maintain stable employment levels.
Chief Investment Officer Thierry Hasse
Hurricanes and a Boeing strike likely played a role in slowing hiring, but even with these factors, the numbers were still weak. In response, the Federal Reserve is likely to cut interest rates on November 6, by 0.25%, as expected.
But here’s the twist: instead of dropping as they usually would with weak job data, the 10-year Treasury yield edged up to 4.37%. Why? It seems investors are bracing for Election Day surprises. With worries of a contested election or a possible “red wave” Republican sweep, long-term yields are creeping higher, as investors wonder what’s next.
Big Tech Earnings: A Mixed Bag
Tech giants had a big quarter—sort of. Google and Amazon delivered solid earnings and were rewarded with a market bump, while Meta and Microsoft fell as investors questioned their spending on AI and data centers. Apple’s results landed somewhere in the middle, with solid profits but little excitement.
Still, these companies are far from struggling: Google posted $26.3 billion in profit, Amazon $15.3 billion, Meta $15.7 billion, Microsoft $24.7 billion, and Apple $24.9 billion. But today’s investors are looking for smart spending and real returns, especially on high-stakes projects like AI.
Three Possible Market Scenarios After the Election
The election outcome could take the markets in any direction, depending on what happens Tuesday night and in the days that follow. Here’s a look at three scenarios investors are watching:
- A Divided Government: If Congress and the White House are split between parties, expect a modest market bump of 2%-3%. A balanced government usually brings more compromise and limits extreme policy shifts, two outcomes investors tend to like.
- One-Party Sweep: If either Republicans or Democrats take control of Congress and the White House, the market might react more strongly, moving up or down by about 3%-4%. A Republican sweep, in particular, could push yields higher, as well, as investors brace for possible increases in the federal deficit.
- A Contested Election: If election results are delayed or disputed, markets could face a significant drop of 8%-10%. Uncertainty doesn’t sit well with investors, and a drawn-out election process could prompt a quick sell-off.
Keep a Long-Term View
It’s easy to get caught up in the drama of Election Day and quarterly earnings, but it’s important to keep your eyes on the horizon. History shows that long-term investors tend to come out on top, even during times of market turbulence. While the election might cause some short-term swings, remember that successful investing is about patience and strategy, not reacting to every headline.
The information contained herein represents the views of Elevage Partners at a specific point in time and is based on information believed to be reliable. No representation or warranty is made concerning the accuracy of any data compiled herein In addition, there can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Any statement non-factual in nature constitutes only current opinion which is subject to change. These materials are provided for informational purposes only and do not constitute investment advice. Any reference to a security listed herein does not constitute a recommendation to buy, sell, or hold such security. Past performance is no guarantee of future results. The historical returns of any securities and/or sectors mentioned in this commentary are not necessarily indicative of their future performance.