What are the changes in the risk market after major elections in history?

Answer: There are many possibilities, but the most commonly circulated one is that "the sharper the drop before the election, the better the rise after the election."

Reasons are:

A. Before the election, the market is often filled with uncertainty because investors are unclear about the election results and the policy direction of the new government. The uncertainty during an election year may cause investors to wait and see or reduce their positions, leading to a market decline. Once the election results are determined and uncertainty decreases, investors will feel more confident. Regardless of who is elected, the market usually welcomes a clear direction, thus driving the stock market up. Therefore, if there is a significant drop before the election, this emotional rebound may be stronger, resulting in a larger increase after the election.

B. After the election, the newly elected government usually proposes a series of policies, especially fiscal stimulus, tax policies, or regulatory measures. These anticipated policies may boost market confidence, especially driven by economic stimulus, tax cuts, or easing policies. If the market drops significantly before the election due to uncertainty, then the positive expectations brought by policies after the election may quickly transform into buying power, creating a rebound.

C. Once the election results are determined, investors can more easily reassess market direction and actively adjust their investment portfolios. This process usually comes with a reflow of funds into the market, especially at the institutional investor level. The second half of an election year is often accompanied by periodic economic stimulus policies, which aim to support the achievements of the new government while boosting economic performance, thereby driving the market upward. Content source: @PhyrexNi

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