Election 2024!

This morning—the morning of the 2024 US Presidential and congressional elections—we are fairly confident that most of our readers (like us) just want this to be over.

Some of you may care very deeply about the result. That is valid.

Some of you may not care very much about the result. That is also valid.

Regardless, we are sure we just want to get on with it. Let us know the result so we can begin to figure out what it means for the markets and our lives.

Is that something we are going to know tonight? Or tomorrow? Or this week?

Recent history would argue it is not.

While most remember the controversial events of January 6, do you remember that the last election's outcome was not determined until Saturday, November 7? That was four days after the election on Tuesday, November 3.

Here is a chart of the S&P 500 from June 2020 to June 2021…

On the chart, we have highlighted two periods.

The first is the period around November 3 to November 6.

Going into the election, the S&P 500 sold off from above 3500 to a low of 3269 four days before the election. It then rallied in the days before the election and continued to rally despite the uncertainty over the outcome.

The other area we highlighted was the period around January 6. This was a very volatile period politically.

Look at what the stock market did during that period. It went STRAIGHT UP!

We think 2020 is a good analogy for the stock market's position in 2024. We are in a confirmed uptrend with a strong tape.

In a similar market in 2020—and with considerable uncertainty and volatility—the stock market essentially ignored politics and moved higher.

There is another example of a contested election back in 2000.

Many might remember that period. It was a contest between Republican Texas Governor George W. Bush and incumbent Democratic Vice President Al Gore.

That election was held on Tuesday, November 7, but the outcome was not decided until more than a month later, on December 12, 2000.

There were issues around a recount in Florida and the issue of "hanging chads.” We won't go through the whole story here, but those unfamiliar with it can read about it here.

While social media did not supercharge the political environment like it does today, this was a period of considerable uncertainty. The doubt about the outcome was much greater than anything we have seen in the last two decades.

Here is the same chart of the S&P 500 from June 2000 to June 2001…

The S&P 500 rallied into the election date (from 1374 to 1425) and then sold off. On the day the election was decided, the market fell back to its original pre-election level. It was close to that level by year-end.

While the market trended down over this period, the move in the S&P 500 was quite small.

This also happened in a different stock market environment than the current one. The stock market peaked in August 2000 and was about to enter a major multi-year crash. This was the beginning of the bursting of the Internet Bubble.

While we know the devastation that period caused stock prices, when the election of 2000 occurred, the crash had just begun. It was far from clear whether the sell-off was going to be a normal correction or a larger crash.

Looking at how the S&P 500 traded during this period of extreme uncertainty, we are impressed that it was essentially flat, especially on the precipice of the most significant down move in the stock market in fifty years.

What do we think this means for today's results?

We think it is a pretty good roadmap.

We think that no matter who wins, how long it takes to figure it out, or how hotly contested the decision ends up being, earnings will lead the stock market.

If earnings continue to grow like they did in 2020 and 2021, the stock market will rise.

The stock market will go

down if earnings go down, like in 2000 and 2001.

What ultimately matters for the market is EARNINGS and not politics.