With the U.S. elections just around the corner, investors are keeping a close eye on the S&P 500, wondering what the final months of 2024 might hold for one of the world’s most-watched stock indices. Historically, November and December are strong months for the S&P 500, even in election years, which tend to bring unique market pressures. But how might these months play out this year?
A Look at Historical Trends in Election Years
“November and December are two of the best months to be investing in the S&P 500.” – Chua Jen-Ai, Julius Baer Research Analyst
In a recent episode of the Beyond Markets podcast, research analyst Chua Jen-Ai from Julius Baer highlighted that “November and December are two of the best months to be investing in the S&P 500.” Her analysis points out that, over the past 60 years, the S&P 500 typically experiences a minor correction around election time, followed by a rally. This pattern holds even in years marked by political and economic uncertainty, suggesting that the market may be more resilient than many expect.
Historically, election years like 2016 and 2020 saw similar trends. As voting draws to a close, market participants gain more clarity on fiscal and economic policies, driving up investor confidence. These data-backed trends indicate that, despite the volatile sentiment around elections, the S&P 500 has a tendency to stabilize and advance, ending the year on a high note.
Expert Insights on S&P 500’s End-of-Year Forecast
This optimistic view is shared by other financial experts as well.
On The Markets podcast, Mike Washington of Goldman Sachs provided an ambitious target, projecting that the S&P 500 might surpass 6000 points by the new year. According to Washington, easing inflation concerns, combined with a favorable interest rate outlook, could bolster investor confidence and drive growth. His analysis aligns with Chua Jen-AI’s historical perspective, suggesting that while short-term volatility is inevitable, the long-term trajectory remains positive.
How Political Stability Might Play a Role
One of the key factors driving a year-end rally, especially in election years, is the stabilization of political uncertainties. Following the conclusion of the elections, markets often respond favorably as they digest anticipated policy changes. Investors are generally more comfortable taking positions once the election outcomes are clear, leading to increased inflows in November and December.
This trend is further supported by data showing that markets generally perform well during these months, often propelled by holiday-season spending and year-end portfolio adjustments. Even as economic headwinds persist, a clear electoral result can ease market anxieties, encouraging more investors to enter the market.
How Should Investors Approach the S&P 500 in the Final Months of 2024?
- Expect Short-Term Volatility: The weeks leading up to the election might see fluctuations. Historically, a slight correction around this period is normal, so investors should be prepared for minor swings.
- Stay Focused on the Bigger Picture: Both Chua Jen-AI and Mike Washington emphasize that November and December tend to be strong months for the S&P 500. This suggests that any short-term dips could present buying opportunities, especially for those looking to capitalize on long-term growth.
- Monitor Policy Signals: Post-election, markets will be looking closely at signals from the new administration regarding fiscal and economic policies. Pay attention to statements and policy discussions that might impact sectors like technology, healthcare, and energy, as these could influence market momentum in the final stretch of the year.
Closing Thoughts
The outlook for the S&P 500 in the last two months of 2024 seems cautiously optimistic. As Chua Jen-AI and Mike Washington both highlight, there’s a strong case for a year-end rally in line with historical election-year trends. While no forecast is guaranteed, understanding these patterns can offer valuable insights for investors looking to navigate the remaining months of the year.
Investors should keep an eye on short-term corrections but also recognize the potential for gains as the market moves beyond the uncertainties of the election cycle. As always, a well-considered approach, grounded in historical trends and expert analysis, is key to navigating this election season with confidence.