Elections bring uncertainty and volatility. They can also bring endless nonsense to your inbox. While turning off social media is tempting, the impacts are too important to ignore. As an antidote, LearIM has launched “Stock the Vote” (STV) to share non-partisan, fact-based analysis. We explore politics from the perspective of an investor. Each party has a separate set of facts…STV offers an unbiased third.

Below is the outline for our analysis of the impact of the elections on capital markets.

Its Debate Time

The first 2024 Presidential debate took place on Thursday the 27th at the CNN studios in Atlanta, Georgia. With the Jake Paul/ Mike Tyson fight postponed, we were excited for this battle royale. However, it did not take long for the excitement to transition to sadness. It became clear from the first question that much has changed since their debate four years ago. Father time is still undefeated.

But First…

Before we dive into the debate, let’s look at the polls and betting odds. A friendly reminder – we are nonpartisan investors – the below is cut-n-paste from independent sources with intention of reporting the facts. The collection of various reputable polls from RealClearPolitics.com on June 26, 2024:

Remember, the polls are just one piece of the puzzle. The battleground states are also an important factor. If we examine the polls in the battleground states, Then Trump appears to have more of a lead as of June 26th. These polls are all before the debate. 

Next, we turn to the betting odds for an alternative look at the election from oddschecker.com. Unlike the polls, the betting odds move daily. The odds support the data above and confirm Trump’s lead before the debate on June 26th.

The odds at 10:52 EST, after the debate, on June 27th revealed a big shift away from Biden.

Then, on June 28, 2024 at 8am the odds of Biden becoming President got worse after the media sounded alarm bells.

One does not have to be professional gambler to notice the odds of Biden being President are slim at this point in time. As the President’s mental state was further debated overnight, the reality seemed to hit the oddsmakers and the media. The media poured gasoline on the fire with the overnight headlines. The below is from the company Bloomberg.  The writer calls the performance “disastrous”.

Most all media outlets shared the same sentiment leaving the Biden campaign yelling “Et Tu Brute?”

Going Back to Cali

The focus of the political community is not who will win, but who will be the Democratic candidate. The front runner is California Governor Gavin Newsome. Governor Newsome tried to stop the madness with an e-mail the day after the debate:

The Stock Market

The debate was less about the issues and more about the physical and mental performance of the candidates. As stocks investors, we began seeking information on tariffs/taxes and energy policy but ended up not learning anything new. In fact, the amount of lies and exaggerations was not helpful at all. But, maybe the stock market is telling us something.

After nearly half the year complete, the S&P 500 is up 15% as of June 30, 2024. This is a strong start for the stock market. Is this bull market a result of the election year? It is very difficult to tell. To further complicate the relationship between elections and stock markets, the rally this year can be largely attributed to a few stocks in the AI area. And energy stocks lagging the market. The energy sector is an area that should perform well under a Republican administration. 

The day after the debates, the stock market is about flat, but energy stocks are getting a slight boost. 

Conclusion

After the debate, the election just got real for both parties.  The election season is now in full effect and there will be many ups and downs for both candidates from this point onward. Similarly, the stock market could get more volatile after a very strong start to 2024. 

We will continue to monitor the presidential race but will turn our attention to the congressional races in the next issue. Right now, it appears Republicans are the clear leaders for President, but this is only half of the story. Congress will be important to getting legislation approved. 

Disclosures

This letter is for informational purposes only. The content herein contains the observations and opinions of the author, is not intended to provide investment advice, and should not be relied upon for any investment decisions. Past performance is no guarantee of future results and information pertaining to our processes is subject to change at any time without notice.