Investing Amid the 2024 U.S. Elections: What Investors Should Know

Executive summary:

  • Polls suggest that neither the Republican or Democratic party is likely to win an overwhelming majority in the U.S. November elections.
  • Although a narrow congressional majority could mean elevated risks of government shutdowns, market volatility may be short-lived.

The bottom line: While elections can be newsworthy, we think that investors shouldn’t be too concerned about the impact on financial markets. Staying disciplined will help investors in the long run.

I have pretty much made up my mind to write something about the 2024 U.S. elections.1 I know you maybe hoping that I’ll tell you who will win the 2024 U.S. presidential race. But I can’t. In fact, I can’t even vote in the U.S. elections (I’m Canadian).

Nevertheless, I hope that my article analyzing the potential impact of the elections on financial markets proves insightful, and that by the end you will understand why ‘staying disciplined’ is my favorite campaign slogan.

Who wins the U.S. presidency can make the news, but legislative changes depend on Congress

The media likes to focus on the presidential race component of the elections. And each of the presidential candidates may have different visions for what they want to accomplish if they win. But it’s important to remember that achieving their policy agendas will depend on cooperation from the U.S. Congress. After all, the legislative branch is responsible for drafting new legislation.

As of Jan. 10, 2024, polling site FiveThirtyEight suggests that 44.6% of Americans would support Republican candidates for Congress, and 43.5% would prefer Democratic candidates instead.2 While polling is not necessarily a perfect predictor, the data suggests a high likelihood that neither party will garner a commanding majority in Congress. Given that many laws require a supermajority (3/5ths of voting members, or 60 senators out of 100 total) of support in the Senate, it will likely be difficult for new laws to pass without at least some members of Congress crossing the aisle and voting with the opposite party. Since Republicans and Democrats often have sharply divergent views, there will be a natural restraint on how bold the new legislation can be. Let’s look at what this might mean for the markets in the year ahead.