By William Power
One of the oldest investing maxims is that investors hate uncertainty. And there could be just a little of that ahead of Election Day.
But no matter what happens at the ballot box, the stock market is holding on to solid gains so far in 2024. And history has shown that just getting past the election is helpful for the market, no matter who wins.
"Election-driven volatility has historically been short-lived -- even if the results of the election were not immediately known, as in 2000," says Saira Malik, chief investment officer at Nuveen.
The average U.S.-stock fund eased 1.0% in October, to trim the year-to-date return to 14.9%, according to data from LSEG, formerly Refinitiv Lipper. (See funds-data tables including Mutual-Fund Yardsticks.)
"The market seems to be shaking off any election results," says Rob Kantor, CIO & co-founder of XML Financial Group. Still, he says stocks are showing the effects of the recent run to record highs: "Overall, the market is a bit over its skis on an average historic [stock valuation] and stocks that are not hitting their estimates are getting pounded, even in the tech sector."
Meanwhile, bond funds, which have been drawing in record amounts of cash from yield-hungry investors, took a pause during the month. Funds focused on investment-grade debt (the most common type of fixed-income fund) fell 2.5% on average, to trim the year-to-date return to 2.4%.
Behind the bond weakness for the month: Some investors are seeing the prospect of a rising postelection budget deficit, which has triggered a rise in bond yields (bond prices fall as yields rise).
International-stock funds, meanwhile, were down an average 4.7% for the month, to leave them with a 7.7% gain for the year so far.
FINANCIAL FLASHBACK
A look back at Wall Street Journal headlines from this month in history
-- 25 YEARS AGO: 'New Economy' in the Dow
It was a long time coming, but 25 years ago this month the "New Economy" joined the Dow Jones Industrial Average. The change, as of trading on Nov. 1, 1999, came in the form of adding chip maker Intel, Microsoft and SBC Communications, which cemented the role of both technology and communications sector in the index. A fourth stock, retailer Home Depot, was also added to the Dow that day.
As those four stocks joined, out went four old-economy stalwarts: Chevron, Goodyear Tire & Rubber, Sears Roebuck and Union Carbide.
The changes, which had been announced the week before the new lineup began trading, were also notable because it was the first time that stocks from Nasdaq (Intel and Microsoft) had joined the Dow. Until then, all 30 Dow industrials had been listed on the New York Stock Exchange.
The Wall Street Journal dubbed the changes in the index "one of the most important overhauls in its 103-year history."
"If that change didn't happen, there would have been a big discrepancy between that index and it would have been a big oversight," says Susannah Streeter, head of money and markets at U.K.-based investment company Hargreaves Lansdown. The index is designed to reflect the major sectors of the U.S. economy -- excluding transportation and utilities, which have their own Dow indexes -- not just the largest public companies. And by then, the New Economy was well under way and clearly here to stay.
The switch came more than a decade after American corporations began embracing desktop computers as necessary business tools. "The index components are carefully chosen to avoid including stocks that are a bubble," Streeter says.
(Now, 25 years later, the Dow is evolving again. On Friday, it was announced that Intel will be replaced by AI-chip darling Nvidia.)
-- 40 YEARS AGO: Concerns Over Deficit Again Start to Chill Investors' View of Stocks
-- 50 YEARS AGO: Defeat of Casino Gambling in New Jersey Is Biggest Surprise in Referenda Voting
--By Simon Constable
William Power is deputy section editor of Journal Reports in South Brunswick, N.J. Email him at william.power@wsj.com.
(END) Dow Jones Newswires
November 03, 2024 10:59 ET (15:59 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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