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November 24, 2020
Even in the best of times, understanding markets can be a challenge. Add in the US presidential election and a difficult task becomes nigh on impossible. But perhaps history has some of the answers?

Link to data dashboard1 :

Chart one: What happens to stock market volatility in an election year?

Using a data set reaching back to 1992 we considered the maximum and minimum range of the Vix Index2 60 days before and 60 days after a US Presidential election.3 We then calculated the median cumulative change over the same period (marked in red below) and the same for the 2020 election to date (marked in blue). So, what does this tell us? In general terms, it appears volatility trends upwards ahead of Election Day before falling back thereafter. This year, however, the story is different: faced with the mother of all market dislocations thanks to Covid-19, volatility is already at historic highs. Where it heads next is anybody’s guess.

Chart two: What happens to the S&P 500?

How does the S&P 500 perform in the lead-up to election night? Here we considered elections dating back to 1992 and looked at the stock market response from three months before the result to one month before the result. Correlation isn’t causation but the data suggests a rising market might be associated with an incumbent win.

Chart three: How the US dollar performs

Using the same methodology and timeframes as above, we looked at how the greenback responds in an election year. Again, the data points to a tentative correlation: that an incumbent victory may be more likely when the dollar is weaker.

Chart four: Which combination of House/Senate/President is best for the stock market?

This data set goes all the way back to 19334 and considers the annual average performance of the S&P 500 under different permutations of partisan control. Here, history appears to underline the importance of checks and balances, with the most convincing stock market returns coming during a split Congress. Perhaps counterintuitively, a unified Congress appears to be correlated with weaker stock market performance.

Chart five: Who votes wins

The Pareto Principle,5 also known as the 80/20 rule, is based on real-life observations that there’s often a mismatch between inputs and outputs. In wealth distribution, for instance, the United Nations has highlighted how the richest 20% of the world's population generate 82.7% of the world's income.6 Looking back to the 2016 election result, we can see another example of the Pareto Principle in action – with neither Hilary Clinton nor Donald Trump garnering the votes of more than 20% of the US population as a whole.

Looking back to the 2016 election result, we can see another example of the Pareto Principle in action – with neither Hilary Clinton nor Donald Trump garnering the votes of more than 20% of the US population as a whole.

Chart six: Rising debt

Probably the starkest of our charts, this set of data highlights how US Federal debt has grown in recent decades. Between 1970 and 1990 total public debt barely grew. Fast forward to the aftermath of the global financial crisis and today’s post-pandemic pump-priming and the picture looks very different.


1 This link directs you to a third-party website. BNY Mellon accepts no responsibility for content on these third-party sites or for the services provided. Also, please be aware that when you access this site, you may be subject to that site's terms of service and privacy policy rules (i.e., sharing of personal information), which you should review carefully before proceeding.

2 The Vix Index uses index options on the S&P 500 to gauge the market's broad expectations of volatility 30 days into the future.

3 NB: We excluded the 2008 election from the sample since it took place in the midst of the Global Financial Crisis and volatility was extremely elevated as a result.

4 Excluding 2001-2002 due to Sen Jeffords changing party mid-year 2001.

5 Named after economist Vilfredo Pareto.

6 United Nations Development Program: ‘1992 Human Development Report’, New York: Oxford University Press


Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others.

Charts are provided for illustrative purposes and are not indicative of the past or future performance of any BNY Mellon product.

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