September 15, 2024 – As the US presidential election season heats up, market analysts are paying close attention to how different sectors within the S&P 500 perform in the months leading up to and following the elections. According to a recent report by Bank of America (BofA), historical trends suggest that certain sectors, such as financials, staples, and utilities, tend to outperform in the lead-up to elections, while energy and materials typically shine after the results are in.
Pre-Election Winners: Financials, Staples, and Utilities
During the historically weaker months of September and October in election years, financials have stood out as the top-performing sector. With an average return of 1.42% over the last century, financials consistently deliver solid gains, while staples and utilities follow with more modest returns of 0.51% and 0.30%, respectively. Although staples and utilities may weaken after the election, financials maintain momentum, continuing to post strong gains into November and December.
**“Financials rank third during the November-December period, with an average return of 4.19%,” BofA analysts noted. In contrast, staples and utilities fall to 10th and eighth place, respectively, in the post-election period.
Post-Election Surge: Energy and Materials
After the election results are in, energy and materials sectors historically take the lead. Energy, which typically posts a modest 0.18% return in the pre-election period, sees a surge in the final two months of the year, climbing to second place with a 4.35% gain. Materials, which tend to struggle before the election with an average return of -3.69%, experience the most significant turnaround, ranking first post-election with a dramatic 4.77% gain.
Underperformers: Technology and Healthcare
While financials and materials enjoy strong performances, technology and healthcare sectors have typically underperformed during both periods. Technology ranks ninth in the pre-election months and seventh post-election, while healthcare fares slightly better, ranking eighth and sixth, respectively.
BofA’s analysis also emphasizes the importance of seasonal strategies, highlighting the opportunity for investors to capitalize on the expected market rebound by buying into sectors such as industrials, telecommunication services, technology, and materials during the September-October dip.
Consistent Trends in Election Periods
Looking at the performance from Labor Day through Election Day and beyond, financials again dominate, ranking first during the pre-election period and second post-election. Meanwhile, staples and utilities perform well leading up to the election but tend to lag during the post-election rally.
On the other hand, technology, communication services, and real estate consistently struggle across both periods, often delivering negative average returns. These sectors face greater volatility and tend to underperform compared to their peers.
For investors, understanding these historical sector performance trends around US presidential elections offers valuable insights into how to navigate the S&P 500 during a time of heightened political and economic uncertainty.
Key Keywords:
S&P 500 sectors, US Presidential elections, Bank of America, sector performance, financials, energy and materials, election year market trends
