Sunday, May 7, 2017

Recent History of Election's Impacts on the US Stock Market

As traders, we are interested in the short term impacts on the stock market by major elections. Will tomorrow's French presidential election impact the US stock market again? Based on my study below, the Wall Street is telling us: No, as the VIX is at very low level, which is quite different from that on the day before the initial French election result about 3 weeks ago.

As part of the study on major election impacts on the US stock market, I looked at the prices of both SPX and VIX in the past year as shown in the chart below.
SPX & VIX's Reactions to Major Elections

  • More than 50% of time when VIX reached 16.5 and above were due to pending elections
    • British EU Exit (Brexit)
    • US Presidential Election
    • French Presidential Election (Initial)
  • VIX created negative divergences when foreign elections were pending
    • SPX price does not fall deeper but the fear on the stock market (VIX) increases to higher level
      • The negative divergence suggests over-abundance of fear
      • It's usually bullish for stock market

These are my observations only. What are your findings as a seasoned trader?  For the long history of how stock market reacts to US presidential elections, I found the following article very helpful: How the stock market performs on, and after, Election Day on

Since traders need to prepare for major events before they occur, we are interested in FED announcements as well. I had studied the impacts of FED announcement on stock market before in my post: A Study of Market Moves, VIX and FED meetingsI plan to update and review the recent impacts of FED announcements in the future when I get a chance.

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