Biggest stock market rally seen after close elections, data reveals

Analyzing past election cycles, CNBC found that stronger relief rallies occur during the closest presidential races.

Since 1980, data shows that the S&P 500 has gained an average of 1.5% between Election Day and the end of the year for all presidential races. However, this average performance increases to 3.9% when looking specifically at the tightest races.

The median of the closest contests in the post-election period, including 2000, 2004, 2016, and 2020, is higher than the broader figures for the session immediately following Election Day, as well as a week and month later.

The 2024 election is expected to be a close race, with NBC News' latest polling showing former President Donald Trump and Vice President Kamala Harris in a tight contest as voters prepare to cast their ballots on Tuesday.

Dario Perkins, an economist at TS Lombard, stated in a note to clients that close elections, such as the current one, typically result in a market bounce, regardless of the outcome or policies introduced.

In close races, the next-day and week-later returns are crucial. Although historical data indicates that stocks usually decline during these periods, election cycles with tight margins have tended to result in short-term gains.

Perkins highlighted research stating that the "resolution of uncertainty" is a key factor driving the anticipation of gains following the election. However, he cautioned that an unclear outcome may trigger an unfavorable market reaction in the immediate future.

Wall Street and beyond are concerned about the outcome of this Election Day. Unlike in 2020, only some states have altered their ballot counting procedures to prevent delays in results. Approximately 79.7 million Americans have already cast their votes early or by mail, according to NBC News.

Notably, a stock viewed as a proxy for betting on the Republican nominee's odds of victory, has whipsawed in recent weeks.

Since 1936, the first 10 months of a presidential election year have seen a gain of nearly 20% in 2024, according to Bespoke Investment Group.