According to analysts, election years can be a time for strong returns in the stock market, as the S&P 500 has historically averaged 10% to 20% return since 1928.
Interestingly, the third year of a president's term appears to be the sweet spot, with analysts citing an average return of 18.08% during that period over the past 95 years. Even the fourth year holds promise, with an average return of 9.5% with a 75% chance of positive gains.
While the entire year can be volatile, analysts highlight that the third quarter tends to be the strongest, with an average return of 5.21%, which is nearly 70% of the average gain for the full year. However, it is important to note that election years since 1928 also see an average annual drawdown of 14.96% for the S&P 500.
Analysts also analyze some seasonal trends during election years. In the first half, they mentioned that it is usually range-bound with potentially lower returns.
Meanwhile, it is said to deliver stronger returns in the second half, especially in the third and fourth quarters.
When it comes to a Democratic president, the Dow Jones Industrial Average (DJIA) has historically underperformed, while sectors like energy, healthcare and financials may see gains.
For a Republican president, analysts say cyclical stocks, technology and communications services may outperform.
In general, stocks tend to be the strongest, with small companies historically outperforming larger companies. Analysts say value stocks may lag throughout the year but finish stronger than growth stocks.
Looking to 2024 specifically, analysts believe their forecast for a high-level trading range (HLTR) is in line with historical election year trends and is likely to persist through the November election. The company's year-end price target for the S&P 500 remains at 5,050.