Historically, U.S. presidential elections have brought significant volatility to global equity and commodity markets, especially in the months surrounding Election Day. While markets tend to be cautious and fluctuating pre-election due to uncertainty about future policies, the post-election period usually sees a relief rally as the outcome provides clarity and markets adjust to new or ongoing policy expectations.
Here’s an overview of how markets, specifically equities & commodities, have historically responded around U.S. election results over the past two decades.
Equity Markets: The S&P 500 generally exhibits volatility and mixed performance on election days, influenced by the prevailing economic conditions. For instance, in 2008, the market dropped significantly due to the financial crisis, while 2016 saw an initial negative reaction to Trump's surprise victory followed by a rebound.
Commodities: CBOT grains (corn, wheat, soybean) usually react mildly, with modest gains or losses, except when larger macroeconomic factors are at play. In 2008, the global financial crisis impacted prices significantly, leading to broad losses across commodities.
Crude Oil: Crude oil tends to react strongly to election results, given potential shifts in trade policies and economic expectations. Oil especially saw sharp declines in 2008 but significant gains in 2016 and 2020, reflecting market sentiment about energy policy under different administrations.
Gold and Silver: Gold and silver tend to experience safe-haven demand during uncertain election outcomes, as seen in 2000 with the delayed Bush vs. Gore results.
Copper: Copper seems to be more aligned with growth sentiment, performed well during Trump’s 2016 election, reflecting positive sentiment for infrastructure and industrial spending.
U.S. Dollar Index (DXY): The U.S. Dollar Index (DXY) is influenced by presidential elections, with short-term volatility and longer-term impacts driven by expected policies. In pre-election periods, uncertainty about fiscal and trade policies causes fluctuations. On election day, the dollar often sees initial movements, such as in 2016, where Trump’s win led to a weaker dollar, followed by recovery. Post-election, the dollar’s direction depends on the winner’s policies: Republican victories often favor the dollar due to pro-business stances, while Democratic policies may result in mixed or weaker performance.