Markets, yields, and the election—Barclays has a bold prediction.
With the U.S. elections just days away, analysts at Barclays are projecting a scenario of relative market calm in the aftermath, expecting a mild rally that could drive both bond yields and stock prices higher. Despite concerns of potential unrest, the strategists, led by Ajay Rajadhyaksha, believe that worries over a turbulent transition may be overstated. While some market players are eyeing potential disruptions, Barclays’ analysts are focusing on what they view as a more likely outcome: a “smooth transfer of power.”
This week, we’re examining this potential post-election rally and its impact on investors. In today’s main topic, we’ll discuss the expected resilience of the U.S. institutions in ensuring a peaceful transition, and why Barclays’ team is betting on risk assets to rally post-election.
And in our “This Week I Learned…” section, we’ll dive into how historical elections have shaped market resilience. In our Fun Corner, we’ll lighten things up with a bit of humor on election season—because who doesn’t need a laugh with their market insights?
This Week I Learned…
Why Markets Keep Calm and Carry On During Elections
This week, I learned that 47 record highs in a single year for the S&P 500 isn’t as rare as it sounds. In fact, 1 out of every 15 trading days has closed at an all-time high since 1988. Here’s the twist: these highs often cluster together, meaning upward momentum tends to breed even more upward momentum. For example, after hitting a record high, the S&P 500 has historically returned an average of 13.4% over the next year—higher than its average 11.9% return over any other 12-month period.
But there’s a caveat. History only tells part of the story, and today’s market isn’t quite like the past. Valuations are stretched—with the S&P 500 trading at 21.9x forward earnings, well above the five-year average. Investors should tread carefully because elevated valuations mean any hiccup in corporate earnings growth could lead to sharp corrections. While the market’s past suggests further gains, future returns are still tied to company fundamentals and the risk of a pullback lingers.
The Fun Corner
Election Season Style
In the spirit of election season and Barclays’ “mild relief rally” prediction, here’s a light-hearted look at stock market resilience:
Why did the stock stay calm during election season?
Because it already cast its vote… for long-term growth!
Keep in mind that while emotions may run high across the nation, markets are historically resilient to election drama. Investors, take a page from the markets themselves—stay focused, keep calm, and carry on!
Barclays Projects Post-Election Market Rally
Barclays strategists anticipate a relief rally following the Nov. 5 U.S. elections, with predictions that bond yields and stock prices could rise as investors breathe a collective sigh of relief. Led by Ajay Rajadhyaksha, Barclays analysts suggest that in most election outcomes, the reaction will be one of market optimism, as the anticipated “smooth transfer of power” unfolds. The team’s outlook is supported by their confidence in U.S. institutions’ ability to manage post-election processes peacefully.
While the prospect of a blue wave—a Democratic sweep of the House, Senate, and presidency—could lead to concerns over possible corporate and income tax rate hikes, Barclays believes most other outcomes will support a rally in risk assets. Whether it’s a Trump or Harris win, a divided Congress, or a “Red Sweep,” the analysis projects that markets will trend upward, driven by investor relief. They note that even potential post-election protests would likely have a limited macroeconomic impact, as the markets are expected to quickly pivot to other long-term factors.
Barclays reminds investors of a key historical trend: markets have often rallied post-election, regardless of political turbulence. For those with longer-term investment horizons, the analysts recommend staying the course and adopting a “keep calm and carry on” approach.
The Last Say
Rally Ahead, But Steady as She Goes
As we wrap up this week’s Market Pulse, it’s clear that Barclays is betting on a calm, post-election rally—barring any sweeping legislative changes that could alter corporate tax structures. For investors, this translates to an anticipated increase in bond yields and stock prices, which could offer a momentary boost. But with election uncertainty easing, remember that long-term strategies remain crucial, especially as the U.S. political landscape evolves.
In line with historical patterns, investors are advised to focus on their long-term objectives. Election results may create temporary market movements, but the fundamentals driving long-term gains—like dividends, earnings growth, and market sentiment—remain vital. As Barclays analysts put it, even if the current relief rally takes the spotlight, investors should keep an eye on lasting market forces.This election season, the message is clear: a calm approach and a well-considered strategy may be your best allies in navigating the post-election market.
