Red vs. Blue 2024: How Elections Could Drive the Narrative

April 02, 2024

Red vs. Blue 2024: How Elections Could Drive the Narrative

In a detailed analysis by Damian McIntyre of Federated Hermes (Red vs. Blue 2024: How Elections Could Drive the Narrative), the intricate dance between election results and market performance is dissected to provide investors with a roadmap for 2024. As we dive into an election year fraught with uncertainties, understanding the historical context and potential outcomes becomes paramount for navigating the financial landscape.

The Historical Lens: Buy and Hold Prevails (Page 2)

A compelling takeaway is the triumph of the buy-and-hold strategy over market timing based on political outcomes. Data suggests that investors who remain steadfast, irrespective of the ruling party, tend to outperform those who shift their investments in response to electoral changes. This insight underscores the futility of speculative investing based on election results and reaffirms the wisdom of long-term investment philosophies.

Election Years: A Beacon of Positivity? (Page 3)

It's noteworthy that 75% of the past 100 years' election years have closed on a positive note for markets, surpassing the overall positive year rate of 67%. This statistic challenges the common narrative of election years being predominantly tumultuous for financial markets and suggests a more nuanced interaction between political cycles and market dynamics.

Markets' Preference for Certainty (Page 4)

Uncertainty is an unwelcome guest in financial markets. The analysis points out that markets show a preference for known entities, favoring situations where an incumbent is in the race. However, the 2024 election presents a unique scenario with potential legal and health issues for major candidates, adding layers of unpredictability to the mix.

The Role of Alternative Candidates and Third Parties (Page 6)

Please note that this information is from February 2024 and is subject to change as the election year progresses. 

In an interesting twist, betting odds indicate a surprising preference for alternative candidates like Michelle Obama over established political figures such as Nikki Haley. While third parties are gaining attention, their impact is expected to be minimal, serving more as a reflection of voter sentiment than a real threat to the two-party stronghold.

Economic Cycles and the Election Outcome (Page 9)

The relationship between economic cycles and reelection chances cannot be overstated. Historical data reveals a pattern where recessions within the presidential cycle significantly influence reelection outcomes. This correlation highlights the economy's paramount importance in shaping electoral fortunes.

The Path to Victory: Key States and Senate Control (Page 12)

The analysis projects the 2024 election to hinge on eight pivotal states, with the Senate battle equally poised for drama. The current political landscape suggests a razor-thin margin for control, emphasizing the importance of down-ballot races and their potential to sway the broader legislative agenda.

The 2024 Consensus: House and Economic Conditions (Page 14)

Looking ahead, the House of Representatives appears set for a tightly contested battle, with economic conditions playing a crucial role in shaping the electoral narrative. The re-election dashboard presents a mixed economic outlook, suggesting that voter sentiment could be swayed by prevailing financial winds as much as by political allegiances.

Navigating 2024: Strategies for Investors

As we approach the 2024 elections, investors are reminded of the historical resilience of markets and the dangers of overreacting to political developments. The analysis by Federated Hermes offers a pragmatic view, advocating for a measured approach that prioritizes long-term investment strategies over speculative, election-driven reallocations.

In conclusion, while the 2024 elections promise to be a significant event with potential market implications, the overarching message is clear: staying informed, focusing on long-term goals, and avoiding knee-jerk reactions to political developments remain the pillars of sound investment strategy. As history has shown, the markets have a way of navigating through political uncertainty, often emerging stronger on the other side.

Important Dates to Remember (Page 11)

February 2024 – Supreme Court to hear Insurrection/Ballot Case

March 5: Super Tuesday

July 15-18: Republican National Convention

August 19-22: Democratic National Convention

September 16: General Election Debate #1

September 25: Vice Presidential Debate

October 1: General Election Debate #2

October 9: General Election Debate #3

November 5: Election Day