Markets

How Will Stocks React to the 2020 Presidential Debates?

Nervous about how the market will handle the 2020 presidential debates? If history is any guide, the market won't care what happens either way.

Investors worried about how Tuesday night's presidential debate between President Donald Trump and former Vice President Joe Biden will affect the stock market can rest easy.

If history is any guide, the market won't care what happens either way.

Presidential Debates Leave Few Bread Crumbs to Follow

As LPL Financial – registered investment advisor and broker-dealer – notes, the data from past debates going as far back as 1960 don't offer a clue as to how stocks react to the first debate, to say nothing of indicating which party might win.

"Could stocks give a clue who will win the election based on how they do after the debate?" writes LPL Financial Chief Market Strategist Ryan Detrick. "Unfortunately, it doesn't appear to give any hints, as returns and winners are all over the place.

"Still, 2020 is unlike any year we've ever seen before, so we could be one Howard Dean gaffe or Ronald Reagan zinger away from a major sway in this election."

To get a sense of how pointless it is to look to the presidential debate for trading insights, check out LPL's "Chart of the Day" and consider just a few of the numbers:

LPL Financial

  • The odds of the market rising or falling in the session ahead are aren't far off from 50-50.
  • There have been 12 first presidential debates since 1960. On average, the S&P 500 retreats 0.3% the next day. The median performance, however, is a gain of 0.4% for the broad market index. Neither of those outcomes are material.
  • The days and weeks after the debate don't tell us anything useful either. Five days out, the market is higher 50% of the time. As for a month after the debate, again, stocks are positive 50% of the time.
  • On average, stocks lose 0.9%, 1.8% and 2% in the five days, 10 days and one month following the debate, respectively. However, the median return is positive for all of these time frames, albeit at only fractions of a percent. Again, these returns are essentially immaterial.
  • The data are skewed by the 2008 market meltdown.

The bottom line: Don't bother buying or selling stocks based on anything that happens in tonight's debate.

No, it's not a sucker's bet, but it is indeed a nothing bet.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
How to Know When You Can Retire
retirement

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 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 (1/24/22): 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
Tesla Stock: TSLA Headlines Busiest Week of Earnings So Far
stocks

Tesla Stock: TSLA Headlines Busiest Week of Earnings So Far

Our preview of the upcoming week's earnings reports includes Tesla (TSLA), Apple (AAPL), Microsoft (MSFT), Intel (INTC) and Chevron (CVX).
January 24, 2022
8 Facts You Need to Know About Stock Market Corrections
Markets

8 Facts You Need to Know About Stock Market Corrections

Scary as they are, drawdowns are a normal part of the investing process. Having a financial plan in place and sticking to it is every investor's best …
January 23, 2022
Stock Market Today (1/21/22): Nasdaq Sinks Again, Ends Worst Week Since 2020
Stock Market Today

Stock Market Today (1/21/22): Nasdaq Sinks Again, Ends Worst Week Since 2020

A negative earnings reaction for Netflix (NFLX) and options expiration sparked a volatile session for stocks.
January 21, 2022