The race between Vice President Kamala Harris and former President Donald Trump is now going to get tougher. No matter who wins, a lame duck session will follow. The lame duck session takes place immediately after the election until the winning candidate is sworn in. It applies to Congress and the president, and it could be an interesting time. After all this anticipation, Washington is now just a few months away from entering the transition process. But Congress can still meet, and the outgoing president can sign laws and issue executive orders. Let’s see how the broader market compares S&P 500 The index performed immediately after the US presidential election.

Inconsistent

It can be thought that politicians relaxed after the election. But great things happened during the lame duck period. In 1992, after losing to Bill Clinton, former President George H.W. Bush pardoned six men who masterminded the Iran-Contra affair; all of them had been charged or convicted. Former President Barack Obama received several bills from Congress during his lame duck period in 2016-2017, including the Cures Act. Trump had 13 judicial nominees for various courts confirmed by the US Senate before leaving office in 2021.

To see how S&P 500 I looked at the performance of the index dating back to 2000, from the day the new president was elected to the day they were sworn in a few months later. Here are the specific dates of each lame duck period:

8 November 2000-January. 20, 2001

3 November 2004-January. 20, 2005

5 November 2008-January. 20, 2009

7 November 2012-January. 21, 2013

9 November 2016-January. 20, 2017

4 November 2020-January. 20, 2021

As you can see, lame duck terms for the presidency are usually 2.5 months, willy-nilly. Here’s how the S&P 500 performed during each of these periods:

Chart by author. Data source: YCharts.

The results are inconsistent. The average return during presidential lame duck periods is only 1%. There were big moves after Obama became president in 2008-2009 and President Joe Biden won the last election. Obama took office during the Great Recession, and investors appeared fearful of what a Democratic administration would mean for the economy and stock market after eight years of former Republican President George W. Bush.

Stocks made nice gains following Biden’s election. The stock market was already performing well amid the pandemic. Many believed that Biden would implement more stimulus that would spur more stock buying and implement additional policies to help end the pandemic and open up the economy.

What to expect after the election?

The past is certainly not a prediction of future performance. In this case, historical data shows that anything can happen to the stock market during a president’s lame duck term. What’s happening may have more to do with what’s going on in the world than the next president. Make no mistake, next president and Congress will influence new policies and regulations, and potentially even affect the course of inflation and thus interest rates.

But if you’re a long-term investor, you don’t need to buy or sell stocks unless you think a future policy or law from the new president would significantly change your investment thesis. Be prepared for potential fluctuations and understand that a changing political environment may be a contributing factor.