My deadline for this column is midnight on election night. As I write this, I don’t know how the election is going to turn out (though you can probably guess my preference considering that one of the candidates talks about shooting journalists).
I do know that on November 6, and in the days that follow, the stock market is either going to go up or go down, and a lot of people are going to be attributing it to the election outcome. Don’t buy it.
If you follow this column at all, you have probably already read my thoughts about a president’s impact, or lack thereof, on the stock market. Sure, the policies of a presidential administration can, over time, have some sort of an effect on stock market returns.
Yet, most stock prices do not react instantaneously to election results. In case you haven’t noticed, politicians lie a lot. Even the honest ones frequently over-promise and under-deliver, stymied by checks and balances embedded throughout all three branches of government. Traders cannot react much to what a newly elected politician has said he or she is going to do, because all too often it does not actually get done.
When there is some level of certainty about a president’s ability to effectuate a certain policy — tariffs, for instance, can be unilaterally imposed by a president so long as he or she can declare that the targeted import poses some vague link to national security — there remains so much nuance in what actually gets implemented as to make election-week prognostications functionally useless in terms of trading equities. What will the exact tariff amounts be? To which products will tariffs apply? How punitive will the tariffs be toward our rivals and how lenient will they be toward our friends? Beyond some very blunt assumptions in limited industries, it is impossible to make meaningful market-wide assessments before seeing the details in writing.
Like the weather, the economy as expressed in one metric through the stock market is a chaotic system. We can get a pretty good idea of what the weather is doing in our immediate vicinity just by looking around. We can know what the weather was doing at a given time elsewhere by combing through the data after-the-fact. Hell, we can even predict the weather quite accurately several days into the future. Still, anyone who says he knows exactly what the weather is going to look like on a given day a year into the future is an obvious charlatan.
When Donald Trump was president, the stock market had a rough 2018 and a huge (albeit temporary) drop related to the pandemic, but it performed great overall. With Joe Biden in the White House (and with Kamala Harris as his vice president) the stock market has been on an almost uninterrupted tear for some time, repeatedly setting new record highs. Although Trump has said some things about a second term that terrify economists, and Harris has proposed a few policies herself that might not work out so well for the equities markets, at least, based on past experience, neither candidate can be assumed to be an absolute disaster for the stock market on Day One.
As the election results come in, markets will be open and traders will be working. However, whether your candidate wins or loses, you really should not blame the election for whatever direction the ticker symbols are headed in the coming days.
Now, there is one huge individual exception to this general market-wide approach: shares of Trump Media & Technology Group trading under the ticker symbol DJT. Since the company hardly makes any money at all and bleeds capital, conventional wisdom is that DJT shares will crater if Harris wins the election given that there will be no obvious way for a defeated Trump to direct funds to the company he remains the majority shareholder of. One can imagine a scenario in which swathes of Trump supporters, enraged by another “stolen” election, flock to Trump Media’s Truth Social platform as a form of protest, thereby bolstering its bottom line. Yet, the MAGA faithful have not been exactly unenthused for the past few years and nonetheless failed to embrace Truth Social. The DJT price will react to the election, and odds are good that it will be a rout if Harris wins or a surge if Trump wins.
For the most part, you should probably ignore the stock market for a few days as you digest the election results. The stock market is not going to be dramatically affected by the election results, and we are all going to have more important things to worry about this week.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at [email protected].