Fresh off nomination-clinching wins in their respective primaries, President Joe Biden and former President Donald Trump are set to square off in what is likely to be a bruising, no-holds-barred race to the finish in November. Funny, but Wall Street doesn’t seem to care. Not yet, anyway. The campaign, despite its potential for contentiousness between two polarizing candidates, has drawn little notice from the investment community. Major stock market averages have posted solid gains this year , as the focus has been more on what the Federal Reserve is up to than who will occupy the White House in 2025. Such indifference likely comes down to a few key factors: An economy that appears pretty stable , the prospects for continuing policy accommodation no matter who wins — and the reality that with political divisions so acute in the U.S., neither president will be free to enact an aggressive agenda that radically changes the current state of play. Both Trump and Biden sewed up their respective Democratic and Republican nominations with primary victories Tuesday . “Gridlock is good,” said Doug Roberts, founder and chief investment strategist at Channel Capital Research. “Either way, the margins [of congressional control] are going to be so slim that they’re not going to be able to get much done, no matter what they’re promising.” A history of gains That likelihood of gridlock has fed the prospects for the status quo of steady economic growth, a solid labor market and inflation trending lower . Those conditions have pushed the S & P 500, the broadest measure of market performance for big companies, to a gain of more than 8% already this year. By historical comparison, presidential election years going back to 1952 have produced average gains of just 7% for the entire year, though elections with an incumbent running have averaged 12.2%, according to LPL Financial . “The economy seems to be reasonably strong. The election is not going to change that much either way,” Roberts said. “It may affect individual sectors based upon the legislation that they’re talking about. In essence, you’re not going to see a lot happen. The market likes gridlock because then there’s not going to be a major redistribution of wealth one way or the other, despite what everyone says.” The market’s moves through the year, though, could be important as they have often foretold outcomes in presidential races. From a policy standpoint, Biden and Trump offer several differences. Where the incumbent has pushed for green energy and electric cars, Trump has espoused the “drill, baby, drill” philosophy of continuing to harvest fossil fuels. Biden endorses taxing the rich whereas Trump pushed through corporate tax breaks while in office. On business, Trump favors less regulation while Biden has pushed for more. Even with those contrasts, the practical impact hasn’t been as pronounced. For instance, Biden has kept many of Trump’s controversial tariffs on imported goods in place, and both used deficit spending to finance their agendas. How the election could matter Then there’s the Fed, which appears to wield a much larger stick than anyone else in Washington these days when it comes to market impacts. While the market has shown virtually no reaction to any of the fireworks between Biden and Trump, it can swing wildly on even a mild tremor from the Fed. But as the market settles into expectations for a patient and somewhat hawkish central bank for the rest of the year, political gyrations could come more into view. “As the noise picks up around the election in the U.S., we’ll see people shift their focus as things gain momentum,” said Joe Salmond, a portfolio manager at Thornburg Investment Management. “There’s still risk [with the Fed], but it’s getting less as time goes by. Overall, things are settling down. That will lower people’s attention.” As far as things that could bring the election more into play, they include the potential for more trouble in the Middle East and Russia , with disruptions in oil triggering higher energy costs. There’s also a possibility that inflation could be stickier than expected and keep interest rates higher for longer, and the possibility for a government shutdown that will make party affiliations important. Whoever wins also will have the critical job of naming a Fed chair, after incumbent Jerome Powell ‘s term expires in early 2026. Investors should start thinking about how the various outcomes could influence choices, Salmond added. Industrial and tech stocks could feel the impact, both to the upside and downside. “Global investors will be looking at our relationship with the rest of the world and what that means for how things are impacted both internationally and within the U.S.,” he said. “There’s a lot of talk around the support we’ll be giving to other countries and how much of what we’re doing will come back in domestically or whether the pre-existing relationships we had will continue.” In some sense, markets will get their own vote as the election moves closer. In 20 of the past 24 elections, according to LPL, when stocks are up three months before Election Day, the incumbent wins. A down market, on the other hand, usually signals a victory for the challenger. The trend makes the market’s moves in the months ahead potentially consequential for determining the election victor.
