Markets haven't forgotten the volatility in the days before and after the 2016 election, and they're already pricing in uncertainty ahead of the 2020 vote. But because long-term trends in how voting is managed in the U.S. have been amplified by the pandemic, we shouldn't expect to have much clarity on the outcome on the night of Nov. 3. Investors need to be prepared for Election Day to turn into Election Month, with key races possibly not being called for days or even weeks.
The most dramatic shifts in markets after the 2016 election may have been in bank stocks and interest-rate markets. Between Election Day and the next Tuesday, the KBW Bank Index rose 13.9% while 10-year Treasury yields rose 0.35%. A note put out by Bridgewater Associate's chief Ray Dalio at the time may have summed up what investors were thinking -- that Donald Trump's victory represented a shift toward policies that would benefit domestic manufacturing and business.