The U.S. stock market experienced its second-best Election Day rally in history on Tuesday, with the Dow Jones Industrial Average closing up more than 550 points or 2 percent.
The S&P 500 index also gained more than 58 points, or nearly 1.8 percent, by the end of the trading day at 4 p.m.
The gains are a sign of positive trader sentiment, although it’s unclear if that has to do with hopes of a clear winner emerging, possible additional action when the Federal Reserve meets later this week, or a sense of relief about the political contest coming to a close. It also sets the markets up for a potentially big drop on Wednesday if traders are spooked by any tally uncertainty that could emerge later on Tuesday evening.
President Donald Trump has repeatedly touted the performance of the stock market as a reflection of his job performance, with the market hitting all-time highs during his presidency. Even after the coronavirus ravaged the economy and caused a painful selloff in March, markets have recovered since then with the S&P 500 and Nasdaq Composite Index hitting new all-time highs this summer and fall.
Still, Tuesday’s performance is a far cry from the best election day ever for the stock market, which was was in 2008 when the S&P 500 gained 4.1 percent and the Dow jumped 3.3 percent, said Ed Clissold, chief U.S. strategist at Ned Davis Research, Inc., a financial research firm.
“There’s a BIG caveat to this statistic. Before 1984, the stock market was closed on Election Day, so there are only nine cases before today, said Clissold said.
Of course, the financial picture was also much different 12 years ago.
When markets jumped in 2008, the New York Times reported that a bounce had become common in the fourth quarter after the election, as investors would express a sense of relief about the end of political contests. But at that time, the market was coming off harrowing lows following successful passage of a bank bailout bill. That came after a market crash at the end of September, when Congress first rejected the massive package.
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