Politics

Election Turmoil Could Rattle Stocks

When Al Gore and George Bush fought it out, the S&P 500 fell 6% from election night through the day following Gore’s concession.

The stock market shrugged off President Trump’s bout with coronavirus. Whether it can shrug off a contested election—if it comes to that—remains to be seen. “The uncertainty has the potential to create some churn,” says Phil Orlando, chief stock strategist at investment firm Federated Hermes. “We could see a 10% to 15% decline in the last couple of months of the year.”

That’s what happened in 2000, when Al Gore and George Bush fought it out. Although the stock market had already peaked in March of that year, the S&P 500 fell 6% from election night through the day following Gore’s concession, losing a total of nearly 9% through late December.

Moreover, says David Kelly, chief global strategist at JPMorgan Funds, “The election drama of 2000 does appear to have contributed to the recession of 2001.” Consumer confidence fell sharply after the election, leading to a slump in spending.

The results this year are unlikely to be as close as in 2000, says Kelly. Nonetheless, a contested election could distract lawmakers from efforts to aid workers, businesses, and state and local governments, he says. “The economic recovery already looks set to slow sharply in the fourth quarter, he says. “This would be a particularly inopportune time for a prolonged bout of political uncertainty.”

The stock market will muddle through in all but the worst-case scenario, says Burt White, chief investment officer at LPL Financial. The impact of a delay in the results would be negligible, he says, and a recount might cause a 5% to 10% pullback. A legal or legislative battle—in White’s view, the least likely election outcome—could result in a correction of 10% or more, he says.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
9 Great Growth ETFs for 2022 and Beyond
ETFs

9 Great Growth ETFs for 2022 and Beyond

These growth ETFs offer exposure to higher-risk, higher-reward stocks while lessening the risk of a single stock torpedoing your returns.
January 18, 2022
The 10 Best Closed-End Funds (CEFs) for 2022
CEFs

The 10 Best Closed-End Funds (CEFs) for 2022

These high-yielding CEFs won't just significantly boost your portfolio income. They'll also allow you to buy their underlying stocks and bonds at a di…
January 12, 2022

Recommended

Stock Market Today (1/25/22): Stocks End Down on Another Roller-Coaster Day
Stock Market Today

Stock Market Today (1/25/22): Stocks End Down on Another Roller-Coaster Day

The major indexes stage another comeback Tuesday but this time can't escape declines; Microsoft falls after hours despite an earnings beat.
January 25, 2022
Could the Stock Market Crash for Real? Here’s How to Prepare
investing

Could the Stock Market Crash for Real? Here’s How to Prepare

After a long march to record heights, the stock market tripped into correction territory in January. How should you react? Thoughtfully.
January 25, 2022
The 60/40 Portfolio Is Dead. Long Live 33/33/33.
investing

The 60/40 Portfolio Is Dead. Long Live 33/33/33.

A portfolio of stocks and bonds used to be the gold standard, but it just doesn’t cut it anymore. It’s time to throw some alternative investments into…
January 25, 2022
Stock Market Today (1/24/22): Dow Erases 1,100-Point Intraday Drop to End Higher
Stock Market Today

Stock Market Today (1/24/22): Dow Erases 1,100-Point Intraday Drop to End Higher

The S&P 500 was on pace to close in correction territory before reversing higher.
January 24, 2022