2024 : Political Year

The american electoral process is underway and will dominate political, economic and financial news throughout the year

It's an election year with 76 national ballots involving more than 4 billion people. Russia will commence on 17 March, Great Britain on 6 May, and the European Union from 6 to 9 June. The most important is undoubtedly the US presidential election, to be held on 5 November. This is a crucial election, influencing the political, economic and social future of the United States, but the results will also have significant implications at global level.

Although the American election will take place in November, the electoral process is already underway with the first caucuses in the States. It is likely to be a Trump-Biden rematch. Unless the ex-President's legal problems prevent him from running for his rival's seat.

Key Dates in the electoral process

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The American election personalizes the debate by establishing a duel of personalities despite an indirect ballot via the election of electors by State. The number of electors represents the population of the State and is entirely decided by the majority candidate (Republican or Democrat). California is the largest State to be won (54 electors), followed by Texas (30) and Florida (30).

Number of electors by state

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As is the case every 4 years, it is certain States (Swing States) that will swing the election one way or the other. Arizona and Michigan will be particularly hotly contested.

Exploding costs

The election process is highly structured but leaves enormous latitude in terms of funding. Costs increase every 4 years, with the 2020 election costing twice as much as the previous one.

Cost of US election (USD billion)

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The Democratic camp has spent the most in the last 20 years. President Biden, for example, has spent more than USD 1 billion on his election in 2020.

Cost per applicant (USD million)

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This billion can be related to the number of votes cast. In 2020, each vote for Joe Biden cost USD 13. That's more than double the cost of electing Donald Trump in 2020. And equivalent to the cost per vote for Barack Obama's two elections in 2008 and 2012.

Cost per vote for the winning candidate (USD)

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Presidential equity cycle

The election year is a year of various promises by the candidates. These promises are heeded by the financial markets, which will either be disappointed or satisfied at election time.

A study of events over more than 120 years, i.e. 30 elections, shows that the election year is generally a positive one for the financial markets. With an average performance of around 8%, the Dow Jones appreciated over this period, mainly in the second half of the year.

Dow Jones stock market performance in a presidential year (1900-2020)

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Only the 4th year of the presidential cycle (2023 for the most recent) offers a superior performance if we consider the presidential cycle, i.e. 4 years of stock market performance.

Dow Jones s performance over the presidential year (1900-2023)

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To take the analysis further, we can separate elections won by the Democratic camp from those won by the Republican camp. A clear difference emerges, with financial markets valuing the election of a Republican candidate more highly (almost tripling their performance).

Dow Jones s performance by winning party (1900-2020)

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Dow Jones s performance by party in power (1900-2020)

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The last possible consideration is to separate the elections according to their exact format. In this case, with the party in power being the Democrats, there are several possible scenarios. On average, when the party in power wins the election, the financial markets offer investors the best performance.  Unfortunately, this is not so good if it is the Democratic camp that wins while already in power. The most pessimistic scenario is when the party in power loses, since in this case the performance of equities is negative on average.

Presidential cycle on the USD

A similar analysis can be made of trends in the US dollar. The US currency tends to appreciate during an election year. And this is the only year in the presidential cycle that shows such a pattern.

Evolution of the USD in presidential year (1968-2020)

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Evolution of the USD over the presidential year (1968-2023)

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Unlike the behaviour of equities, there is little difference between the election of a Democrat and a Republican on the behaviour of the USD.

Evolution of the USD oaccording to the winning party (1968-2020)

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A crucial year

There are many issues that come up in an election year, particularly in the United States. Social policy, taxes, international relations, trade and national preference are just some of the issues that will be debated in 2024. American consumers will have to make a choice that affects not just their country, but the whole world, given the impact that the United States has both politically and financially.

Positive financial markets reassure investors, and therefore voters, who will be more inclined to vote for someone who has increased their purchasing power. The central bank and its interest rate policy will obviously have an impact on the perception of the state of the economy and therefore on the policy of the government in power.

Like a big-budget Hollywood film, 2024 will undoubtedly deliver iconoclastic positions, twists and turns, and hopefully a happy ending for the financial markets.

2024 : Political Year