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.

2020 election ballot showing Donald Trump and Joe Biden
(Image credit: Getty Images)

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.

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"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:

(Image credit: 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.

Dan Burrows
Senior Investing Writer,

Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.

A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate and more.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.