Preparing For Election Uncertainties

by: Roger Nusbaum

Roger Nusbaum submits: You may recall Emily Litella misunderstanding that there would be an election.

Emily Litella 7 11 06

You have probably also heard that the election results may not all be in right away. I don't think too many people envision a post 2000 election re-run, but it may be worth taking a look back at the market action then and think about what might happen now.

In 2000, Election Day was November 7. The S&P 500 closed that day at 1431 down about a point. On the 8th, when there was no winner the market fell to 1409, about a 1.5% drop. The market bottomed on Dec 20 at 1264, an 11.67% decline, before starting to work its way higher. On November 9 of that year the market fell 2.5% -- yikes!

An uncertain election result was a new thing for the market when it happened in 2000. If there is some period of uncertainty this time around with who holds Congress or the Senate it makes sense to think there could be some negative market reaction, but since we just had something similar six years ago with a presidential election I do no think it makes sense to fear a decline of the same magnitude.

The market fears the unfamiliar. The last time around there was squabbling and two months of uncertainty. We know what that feels like; the impact will be less, if it even happens.