Wealth Outlook 2024 - Slow then grow

128 North America: an emerging set of new opportunities U.S. election and the markets: a snap preview Who’s going to win? Want a hint? Watch the stock market. While US presidents generally have less impact on the stock market than they’re given credit for, the stock market can be a very good indicator of who is most likely to win the presidential election. As the chart below shows ( FIGURE 1 ), during election years when the incumbent party’s candidate goes on to win, the stock market performs significantly better in the first fewmonths of the year – a period which includes the president’s State of the Union address, the early primaries and Super Tuesday – than it does in the years when the incumbent suffers defeat. This performance differential then narrows mid-year before re-emerging in the final weeks leading up to the election. Divided we stand All else equal, the US stock market prefers a divided government over one party controlling the presidency, Senate and House. Based on a close reading of the electoral maps, the odds are in favor of investors getting their wish – but maybe not in an obvious way. In 2024, some states have gained and others lost Electoral College votes following the 2020 census. If state-by-state voting next November were identical to 2020, it would result in a 303-235 Democratic victory, slightly narrower than the 306-232 2020 win. The Senate map has become even more favorable for the Republican party, which is defending just 11 seats versus 23 between the Democrats (20) and the Independents (3) who caucus with them. Republicans can take control of the Senate by picking up just two seats or one plus the vice president’s tie-breaking vote that comes with winning the presidency. But the opposite is the case in the House, where Republicans have a slimmajority and every one of those seats is up for re-election. FIGURE 1 Presidential year stock market returns since 1952 -5 0 5 JAN MAR APR AUG SEP Average YTD Return (%) 10 All Presidential Election Years Incumbent Party Wins Incumbent Party Loses ELECTION Source:Haver AnalyticsofNovember 15, 2023. Indicesareunmanaged. An investor cannot invest directly inan index. Theyareshown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. Past performance is no guarantee of future results. Real results may vary.