4 history lessons on the US election

4 history lessons on the US election

These insights emphasize how past surprises, contested results, congressional control, and polling errors have influenced markets, offering a lens through which investors might approach this election season.

The first lesson reflects on the market shock of 2016, where Donald Trump’s unexpected victory led to major market fluctuations. 

Analysts point out that one reason for the upheaval was the surprise factor; polls had given Trump just a 28% chance of winning, and state-level data leaned towards Hillary Clinton in battleground areas like Wisconsin, Michigan, and Pennsylvania. 

By contrast, in 2024, Trump’s chances of victory appear stronger, with polling sources like FiveThirtyEight estimating a 54% probability, and betting markets on RealClearPolitics showing a 61% likelihood. 

This difference signals a smaller risk of shock-induced market responses, should Trump win again, compared to the seismic reactions of 2016​.

The second lesson draws from the contentious election results in both 2000 and 1876, flagging how extended periods of uncertainty have historically destabilized equity markets. 

In 2000, for instance, the S&P 500 fell immediately after election day, and losses accumulated over the month amid uncertainty about the final outcome. 

The election ultimately hinged on a razor-thin margin in Florida, resulting in a drawn-out resolution that extended into December. 

Similarly, in 1876, it took months to declare a winner, leading to market volatility amidst an already fragile economy during the “Long Depression.” 

For investors in 2024, these precedents underscore the potential market impacts if prolonged uncertainty arises, particularly if pivotal state results are close enough to trigger legal challenges.

Control of Congress represents the third historical lesson, with Deutsche Bank analysts noting its essential role in shaping presidential efficacy. 

Since Bill Clinton’s administration, every new U.S. president has started their term with unified control over Congress, easing the legislative process for their agenda. 

Divided government, however, creates roadblocks, particularly around fiscal policies and debt ceiling negotiations. 

Currently, prediction markets indicate a mixed probability of a unified government in 2024, reflecting the possibility that either party could control one or both chambers independently. 

This uncertainty suggests that investors may face additional risks, as a divided Congress could limit fiscal policy advancements, echoing past administrations’ struggles in similar situations.

Finally, the fourth lesson flags the consistency of polling errors across key states. Deutsche Bank research points to both the 2016 and 2020 elections as instances where polling underestimated Republican performance across swing states and in Congress. 

This pattern is vital for the current election, as it indicates that errors favoring one candidate in one state are likely to mirror errors in other swing states. 

Such correlated errors could lead to a collective misjudgment of the election outcome and congressional control, magnifying potential market disruptions if results diverge from pre-election expectations​.

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