The end of the summer will mark the tipping point investors should be watching for
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This week began with the Dow Jones Industrial Average setting a new record as it closed above 38,000 for the first time. Things haven’t slowed down since. Yesterday marked the fifth consecutive day of the S&P 500 reaching record highs. After the U.S. reported stronger-than-expected gross domestic product (GDP), demonstrating clear progress on multiple fronts. With GDP annual growth at 3.3% after economists predicted 1.7%, it’s hard to ignore the stalwart progress that the U.S. economy has seen under President Joe Biden this year. And when things are good for the economy, they tend to be excellent for the stock market. This bodes well for the President’s 2024 election chances as Biden gears up to challenge Donald Trump again, this time as an incumbent with a strong economy.
It’s true that while reports of economic progress have lifted the entire markets this week, Trump’s recent victories in Iowa and New Hampshire have lifted stocks such as Digital World Acquisition Corp (NASDAQ:DWAC) and Phunware (NASDAQ:PHUN). However, it’s important for investors to see the big picture here. The upcoming election isn’t impacting markets yet. In fact, it’s unlikely to do so until this summer is over.
The Stock Market and the 2024 Election
Just before he lost the 2020 election, Trump issued the following prediction; “If Biden wins, you’re going to have a stock market collapse the likes of which you’ve never had.” Three years into Biden’s presidency, it’s safe to say that his hypothesis has been proven incorrect. As the 2024 election approaches, Biden can add a strong economy and a booming stock market to his list of accomplishments.
That said, experts have made it clear that they don’t believe anticipation for the 2024 election is impacting markets so far. Barry Knapp, director of research at Ironsides Macroeconomics, recently spoke to Barron’s about this, stating, “I see no evidence that the market rally has anything to do with the outcome of the Presidential election. Banks would be performing strongly if the market were discounting a Trump or Haley victory.”
Anna Rathbun, chief investment officer at CBIZ Investment Advisory Services, also noted that she believes it is still too early for anyone to be trading on the 2024 election, citing the high uncertainty that still abounds. Both she and Knapp have singled out Labor Day as the tipping point after which investors will begin making decisions based on the likely election result.
A Pivotal Moment
It’s true that once the tides turn in the fall, investors can expect the 2024 election to start impacting financial markets. The highly-anticipated event will be dominating news cycles, and speculation as to its results will benefit certain sectors much more than others. If polls and speculation swing in Biden’s favor, areas such as electric vehicles (EVs), clean energy and cannabis will likely continue to grow. If Trump looks like the favorite, expect oil companies and defense contractors to start rising.
My colleague Shrey Dua recently reported that this year’s early stock market gains are currently pointing toward a Biden victory. He’s in good company. As I discussed last week, hedge fund manager and former White House insider Anthony Scaramucci anticipates the same result. While Biden’s economy certainly puts him in a good place right now, as Rathburn and Knapp have emphasized, there’s a lot that can happen between now and Labor Day.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.