This Is How Markets Reacted To Presidential Elections In The Past

Political news has always played a major role in financial markets: GDP, GNP, job reports, and, most importantly, presidential elections that would define the course of the economy for the next couple of years.

Last week, on November 3, the country voted for its next president, and even though the official count is not over yet at press time, the markets have already been reacting to the news.

When the current president prematurely claimed victory on the night of Election Day, Dow Jones Futures have fallen sharply by 300 points.

I will be making a statement tonight. A big WIN!

— Donald J. Trump (@realDonaldTrump) November 4, 2020

Dow Jones Industrial Average (INDEXDJX: .DJI) futures, along with S&P 500 futures, pushed higher, gaining 0.5% and 1.5%, respectively. The Nasdaq Composite Index (INDEXNASDAQ: .IXIC), which had been under pressure last week, surged, rising over 3.5%.

During the overnight session, futures contracts for the Dow and S&P 500 came under some pressure after Trump tried to claim victory.

On Saturday, November 7, CNN was the first media outlet to announce that former vice president Joe Biden was projected to win Pennsylvania’s 20 electoral votes and would become the next president.

Within an hour, NBC, CBS, MSNBC, and ABC projected the same on-air. The Associated Press and Fox News also announced Biden’s victory.

Despite that, Donald Trump refused to accept the results. In one of many of his following tweets, he said, “the election is far from over,” and warned that he is ready to proceed with legal actions to dispute the numbers.

Let’s look at how markets reacted to the previous US presidential election.

2016

The United States had the 58th quadrennial Presidential Election in 2016. Donald J. Trump won the Electoral College with 304 votes compared to 227 votes for Hillary Clinton. Donald Trump’s victory came after key wins in the battleground states of Florida, Ohio, North Carolina, and Pennsylvania.

After Donald Trump officially won the election, the global financial markets plunged but recovered later. Most global stock markets dropped, US stocks opened with a rough patch. Many investors believed Trump's unpredictable nature and anti-trade stance could result in global turmoil.

Dow futures fell by about 300 points Wednesday morning on November 9, 2016, CNN reported at the time. On the night before, they were down more than 900 points. The S&P 500 and the Dow Jones Industrial Average were up about half a percent around noon as investors more calmly absorbed the election results following a night of panic.

The S&P 500 futures, for example, had tumbled as much as 5 percent, and the Mexican peso—which has been a key indicator of investor sentiment during this race—plummeted by 12 percent, to a record low.

2012

In the 2012 United States Presidential Election, Democratic President Barack Obama, and his running mate, Vice President Joe Biden, were re-elected to the second term.

They defeated the Republican candidate, businessman, and former Governor Mitt Romney of Massachusetts and Representative Paul Ryan of Wisconsin. Obama won 332 electoral votes and 51.1% of the popular vote, while Romney's 206 electoral votes and 47.2%.

Stocks fell sharply, a day after President Obama’s re-election. The benchmark Dow remained below the psychologically significant 13,000. The Standard & Poor's 500 indexes and Nasdaq composite index ended down 2.3% and 2.5%, respectively, with stocks in nearly every industry lower.
The Dow Jones industrial average closed 313 points lower. Investors were not happy over the defeat of the more business-friendly Mitt Romney.

2008

In 2008, Democratic candidate Barack Obama, junior United States Senator from Illinois, defeated Republican John McCain and became the first African American president of the country. 

Obama garnered close to 70 million votes, some 10 million more than John McCain, and picked up 365 electoral college votes compared to 173 for his Republican rival.

A day after Obama was announced as the president of the United States, the stock market took a major setback. The Dow Jones industrial average lost almost 500 points, along with European markets.

The Dow started the day down about 100 points, fell 200 points by noon, and ended the day down about 490 points or 5.3 percent. The Nasdaq lost 5.6 percent, and the S&P 500 lost 5.3 percent.

Barack Obama inherited a country with the worst economic crisis since the Great Depression. The markets reacted negatively to possible regulatory tightening of the financial sector and taxes.