SPDR ETFs Election Chart Pack - Key Charts to Navigate the 2020 Election - State Street Global Advisors
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®
SPDR ETFs
Election Chart Pack
Key Charts to Navigate the 2020 Election
For Investment Professional Use Only
3236518.11.1.AM.INST 1S&P 500 Performance Under Different
Control Scenarios
Average Annual Performance S&P 500 Post-Election Avg. Performance (1948 – 2017, Cumulative %)
1933 – 2019 Post- Post-Election Post- Post-
Election First-Year Election Election No. of
Returns Return Two-Year Three-Year Times
Political Scenarios % Change Number of Years (Nov - Dec) (Jan - Dec) Return Return
Unified Government 10.03% 42 Democratic President 1.91 19.75 32.36 56.25 8
Democratic President 9.34% 34 Democratic
1.39 15.38 22.83 48.32 6
Congress
Republican President 12.95% 8 Republican
5.42 33.34 71.43 107.49 1
Congress
Unified Congress 7.42% 32
Split Congress 1.49 32.37 50.48 52.55 1
Democratic President 12.96% 10
Republican President 3.60 3.86 14.19 37.75 10
Republican President 4.91% 22
Democratic
2.80 -0.53 3.17 25.87 4
Split Congress 10.38% 12 Congress
Republican
13.60% 4 7.80 8.6 29.59 59.86 3
Democratic President Congress
Republican President 8.77% 8 Split Congress 0.46 4.97 13.50 31.49 3
All Years 9.11% 86
A split Congress has been the most beneficial to the S&P 500’s
performance when a Democrat has been in the White House
Source: Strategas, as of August 31, 2020. Past performance is not a guarantee of future results. Data excludes 2001 due to Sen. Jeffords changing parties midyear
3236518.11.1.AM.INST 2S&P 500 Performance History, Recessions
and Election Outcomes
S&P 500 Performance 3 Months Prior to the Election, by Outcome S&P 500 Performance Since 8/03/2020
(1928 – 2016) 3,600
3 Months Prior 3,550
Incumbent Economic
Election Year to Presidential
Win/Loss Recession 3,500
Election
2016 -1.90% Loss
3,450
2012 2.45% Win
2008 -19.48% Loss Recession 3,400
2004 2.16% Win
2000 -3.21% Loss 3,350
S&P 500 Index Level
1996 8.17% Win
3,300
1992 -1.22% Loss
1988 1.91% Win 3,250
1984 4.80% Win
1980 6.73% Loss Recession 3,200
1976 -0.09% Loss
3,150
1972 6.91% Win
1968 6.45% Loss 3,100
1964 2.63% Win
1960 -0.74% Loss Recession 3,050
1956 -2.58% Win
1952 -3.26% Loss
1948 5.36% Win Recession
1944 2.29% Win
1940 8.56% Win
Historically, when the S&P 500 gained three months prior to the
1936 7.92% Win
-2.56% Loss Recession
election, the incumbent party won, with few exceptions.
1932
1928 14.91% Win Only once has an incumbent won during a recession
Source: Strategas, as of August 31, 2020. S&P Index performance for 2020 as of 10/30/2020. Past performance is not a guarantee of future results. Data excludes 2001 due to Sen.
Jeffords changing parties midyear. 08/03/2020 was picked because it will be exactly three months before the election date on 11/03/2020.
3236518.11.1.AM.INST 3Contested Elections
The contested election in 2000 may provide insight if the same happens in 2020, as
back then, it created considerable uncertainty and led to equities selling off
Equity Market Performance During the 2000 Recount Bond and Gold Performance During 2000 Recount
(11/07/2000 – 01/31/2001) (11/07/2000 – 01/31/2001)
10% 10%
8%
5%
Normalized Performance (%)
6%
Normalized Performance (%)
4%
0%
2%
-5% 0%
-2%
-10%
-4%
-15% -6%
S&P 500 Index Russell 2000 Index Core Agg Bonds US Treasuries Long-term US Treasuries
MSCI EAFE Index MSCI Emerging Markets Index
Gold US High Yield
S&P 500 Low Volaitlity Index (Lowest Quintile) S&P 500 Quality Index (Highest Quintile)
Source: Bloomberg Finance, L.P. Past performance is not a guarantee of future results. Index returns are unmanaged and do not reflect the deduction of
any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income. S&P 500: S&P 500 Index; Gold: LBMA Gold Price;
Russell 2000: Russell 2000 Index; Agg: Bloomberg Barclays US Agg Index; US Treasuries: Bloomberg Barclays US Treasury Index; EAFE: MSCI EAFE Index; Emerging Markets: MSCI
Emerging Markets Index; VIX: VIX Index. S&P 500 Low Volatility Index: The Low Vol basket consists of S&P 500 stocks ranked at bottom quintile based on volatility. S&P 500 Quality
Index: Basket consisting of S&P 500 stocks ranked at highest quintile based on quality
3236518.11.1.AM.INST 4Election Volatility
Option markets are pricing in an increase in market volatility ahead of the election
in November, consistent with historical volatility trends in election years.
Historical Monthly Realized Volatility (1929 – 2019) VIX Futures Levels Measured at Different Times
10/29/2020
4.5 34.0
Election Year Average 10/16/2020
Non-Election Year Average
9/30/2020
4.0 33.0
3.5 32.0
Daily Return Standard Deviation (%)
3.0 31.0
Futures Level
2.5 30.0
2.0 29.0
1.5 28.0
1.0 27.0
0.5 26.0
25.0
0.0
Nov.-2020 Dec.-2020 Jan.-2021 Feb.-2021
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Future’s Expiration Date
Source: Bloomberg Finance, L.P, as of 10/30/2020.
3236518.11.1.AM.INST 5Presidential Polls
With days remaining before Election Day, Biden is ahead with a large margin in half
of the swing states and national polls against Trump
COVID-19 Cases vs. Polling, Year to Date Biden vs. Trump Avg. Poll Differences in Swing States
5-Day Changes to Confirmed COVID-19 Cases 9/23/2020 10/23/2020
6.50 6.30 6.40
Biden vs. Trump National Avg. Poll Differences
5.50
5.00
400 12%
4.30
3.00
350
10%
5-Day Change in COVID-19 Cases (Thousands)
1.40 1.20
300 0.500.60
0.00
8%
Average Poll Difference
250 MI PA WI FL AZ NC
Trump Presidential National Avg. Poll vs. Job Approval Avg. Poll
200 6%
Job Approval Avg. Poll Trump 2020 US Presidential Avg. Poll
150
National Poll Average (%)
4% 48 46
Job Approval Poll (%)
100 45
46
2% 44
50
44 43
42
0 0% 42
41
40 40
12/31/2019 2/29/2020 4/30/2020 6/30/2020 8/31/2020
Source: Bloomberg Finance, L.P.; RealClearPolitics, as of 10/30/2020.
3236518.11.1.AM.INST 6Congressional Race
Current betting odds showed a higher probability of Democrat-controlled senate and
White House lately
Probability for House Control Probability for White House Victor Probability for Democratic Sweep*
100% 80% Trump Victory (%) 45%
Biden Victory (%)
70% 40%
80%
35%
60%
30%
50%
60%
25%
40%
20%
40%
30%
15%
20%
20% 10%
10%
US PredictIt 2020 Senate Party Control Democratic 5%
US PredictIt 2020 Senate Party Control Republican
US PredictIt 2020 House Party Control Democratic
US PredictIt 2020 House Party Control Republican
0% 0% 0%
Jan-20 Apr-20 Jul-20 Oct-20 Feb-20 May-20 Aug-20 Feb-20 May-20 Aug-20
Source: PredictIt Odds as of 10/30/2020.* The probability of Democratic sweep is calculated by multiplying the probability of Democratic Senate, Democratic House and Biden’s win of
presidential election.
3236518.11.1.AM.INST 7Senate Race
Democrats need to have a net gain of four seats to control the Senate, and based on
538.com forecasts key swing states are leaning blue.
Probability Distribution of Senate Seat Outcomes Probability for Key Swing States
16 80% of outcomes fall
52 R within this range 55 D Current Party Democrat Win Probability
14 R Colorado 85%
R Arizona 80%
12
R North Carolina 62%
10
Probability
R Maine 60%
8
R Iowa 54%
6 R Montana 44%
D Alabama 23%
4
2
35 seats are up for grabs, 23 are
currently held by Republicans and 12
0 by Democrats
60 59 58 57 56 55 54 53 52 51 50 51 52 53 54 55 56 57 58 59 60 61 62
# of Seats
Source: 538.com as of 10/30/2020
3236518.11.1.AM.INST 8Election Results Uncertainty
With the unprecedented number of mail-in voting and non-traditional voting styles, many
doubt that election results will be called on election day
Probability that Election results will be announced, by date (%)
Despite the increase in absentee voting, markets estimate
that the result will be clear on November 4th.
45%
40%
35%
30%
25%
20%
15%
10%
Aug-20 Sep-20 Sep-20 Sep-20 Sep-20 Oct-20 Oct-20 Oct-20 Oct-20
November 3rd November 4th November 5th - November 31st December 1st - December 31st
Source: PredictIt as of 10/29/2020
3236518.11.1.AM.INST 92020 Market-Based Election Issues
Issues Democratic Sweep Republican Status Quo
• Biden’s pandemic response plan includes • Trump’s renewed emphasis on further weakening
greater production of equipment, testing and the Affordable Care Act may alleviate relative
tracing – as well as pursuing novel treatments. headline risk for broad health care.
Health Care
• If necessary, he could use executive orders to • The same is true for specific health services and
implement his plans. insurance firms
Biden is advocating for modern and sustainable • Expect increases in more traditional infrastructure
infrastructure through: spending to rebuild airports, highways, railroads,
• $2 trillion infrastructure plan seeking to and bridges.
Clean Energy • Expect little support for clean energy, as Trump
achieve carbon neutrality in the US power
/Infrastructure likely would continue to pursue looser
sector by 2035 environmental policies.
• Shift toward electric vehicles • However, traditional energy firms may still be hurt
• Reinstate environmental regulations by global supply/demand trends.
• Antitrust legislation could impact mega cap, tech • Antitrust concerns could become just a headline
conglomerates risk for mega-cap tech. firms
Technology
• This may lead to growth opportunities for smaller
/Antitrust innovative tech-related firms • This could lead to little impact on mega-cap tech
conglomerates’ ability to generate cash flow.
Source: State Street Global Advisors, SPDR Americas Research.
3236518.11.1.AM.INST 102020 Market-Based Election Issues
Issues Democratic Sweep Republican Status Quo
• A likely reprieve of punitive tit-for-tat tariffs could • More hawkish trade rhetoric and additional tariffs
be growth positive for regions most impacted by are likely.
the current tariffs.
• This could dampen sentiment for overseas
Trade/ • Given the White House’s sweeping trade
powers, Biden could exert his influence even exposures and sectors that rely on global supply
Foreign Policy
without Congressional support. chains (i.e., industrials).
• But benefit more domestically oriented markets,
such as small and midsize firms.
• Biden has called for higher corporate and • Even before the virus-induced economic downturn,
individual tax rates. the Trump administration was openly discussing a
second tax cut to entice companies to bring jobs
• Sectors with low effective tax rates may be less onshore.
impacted.
Taxes • Corporate tax cuts could boost earnings for sectors
• Higher tax rates may benefit tax-exempt with high tax rates.
securities.
• Lower individual tax rates may fuel more consumer
• If Republicans retain control of the Senate, spending.
Biden’s tax plan may not come to fruition.
Source: State Street Global Advisors, SPDR Americas Research
3236518.11.1.AM.INST 11Clean Energy and Dem. Control
Biden’s advocacy for modern and sustainable infrastructure is pushing up the clean
energy industry
Clean Energy vs. Biden Odds
180 73%
170
68%
160
Relative Performance (Base = 100)
63%
150
Probability (%)
140 58%
130 53%
120
48%
110
43%
100
90 38%
Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20
S&P Kensho Clean Power Index / S&P 500 Index Biden - Win Probability
Source: Bloomberg Finance L.P., calculated by State Street Global Advisors, as of 10/30/2020. Biden win probability is calculated with PredictIt data. Performance quoted represents
past performance, which is no guarantee of future results.
3236518.11.1.AM.INST 12Tax Policy Impacts
Sectors with low effective tax rates may be less impacted by potential higher
corporate tax rates under a Democratic Sweep scenario.
Average of 2019 Tax Rate, by Sector Relative Performance: High Tax vs. Low Tax
Low Vs. High Tax Basket
PredictIt Biden's Probability to Win
59%
80%
1.13
70%
1.11
Relative Performance Ratio
1.09 60%
Probability (%)
1.07 50%
1.05 40%
29%
27% 1.03
30%
21% 20% 20% 20% 1.01
19% 18% 18% 20%
0.99
0.97 10%
4% 0.95 0%
Top 3 Sectors
Low Tax Basket Real Estate Tech. Health Care
High Tax Basket Industrials Cons. Disc. Energy
Source: FactSet, Bloomberg Finance L.P., calculated by State Street Global Advisors, as of 10/30/2020. Low and high tax baskets consist of equal-weighted top and bottom quintile
securities based on their 2019 tax rate, respectively. Past performance is not a guarantee of future results.
3236518.11.1.AM.INST 13Trade Policy Impacts
Under a Democratic sweep scenario, tariff-led pressures on Chinese equities may be
reduced. Conversely, more domestic segments may benefit under the status quo.
S&P China BMI Performance Relative to the S&P 500 During US-China Trade War Foreign Revenue Exposure per S&P Style Box
105 25% tariffs on all steel imports
and 10% on aluminum imports
Value Blend Growth
100
Increase Chinese tariffs
95 from 10% to 25%
Large 30 33 37
90
85
Mid 22 24 24
80
25% tariffs on
818 Chinese
75 products
Small 20 21 23
70
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
Source: Bloomberg Finance L.P., FactSet, as of 8/31/2020. Performance quoted represents past performance, which is no guarantee of future results.
3236518.11.1.AM.INST 14Appendix
Important Disclosures
The views expressed in this material are the views of SPDR Americas Research Team of the security may not rise as much as companies with smaller market capitalizations.
and are subject to change based on market and other conditions. This document contains
certain statements that may be deemed forward-looking statements. Please note that any The trademarks and service marks referenced herein are the property of their respective
such statements are not guarantees of any future performance and actual results or owners. Third party data providers make no warranties or representations of any kind
developments may differ materially from those projected. relating to the accuracy, completeness or timeliness of the data and have no liability for
damages of any kind relating to the use of such data.
The information provided does not constitute investment advice and it should not be relied
on as such. It should not be considered a solicitation to buy or an offer to sell a security. The whole or any part of this work may not be reproduced, copied or transmitted or any of
It does not take into account any investor’s particular investment objectives, strategies, tax its contents disclosed to third parties without SSGA’s express written consent
status or investment horizon. You should consult your tax and financial advisor. Standard & Poor’s, S&P and SPDR are registered trademarks of Standard & Poor/s
All material has been obtained from sources believed to be reliable. There is no Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones
representation or warranty as to the accuracy of the information and State Street shall Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use
have no liability for decisions based on such information. by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State
Street Corporation. State Street Corporation’s financial products are not sponsored,
All the index performance results referred to are provided exclusively for comparison endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and
purposes only. It should not be assumed that they represent the performance of any third party licensors and none of such parties make any representation regarding the
particular investment. advisability of investing in such product(s) nor do they have any liability in relation thereto,
Bonds generally present less short-term risk and volatility than stocks, but contain interest including for any errors, omissions, or interruptions of any index.
rate risk (as interest rates rise, bond prices usually fall); issuer default risk; issuer credit
risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term
securities. Any fixed income security sold or redeemed prior to maturity may be subject to State Street Global Advisors Funds Distributors LLC, member FINRA, SIPC.
a substantial gain or loss.
State Street Global Advisors, One Iron Street, Boston, MA 02210.
The values of debt securities may decrease as a result of many factors, including, by
Tracking Code: 3236518.11.1.AM.INST
way of example, general market fluctuations; increases in interest rates; actual or
perceived inability or unwillingness of issuers, guarantors or liquidity providers to make Expiration Date: December 31, 2020
scheduled principal or interest payments; illiquidity in debt securities markets; and
prepayments of principal, which often must be reinvested in obligations paying interest at
lower rates.
Equity securities may fluctuate in value in response to the activities of individual
companies and general market and economic conditions.
Foreign (non-U.S.) Securities may be subject to greater political, economic,
environmental, credit and information risks. Foreign securities may be subject to higher
volatility than U.S. securities, due to varying degrees of regulation and limited liquidity.
These risks are magnified in emerging markets.
Investments in small-sized companies may involve greater risks than in those of larger,
better known companies.
Companies with large market capitalizations go in and out of favor based on market
and economic conditions. Larger companies tend to be less volatile than companies
with smaller market capitalizations. In exchange for this potentially lower risk, the value
3236518.11.1.AM.INST 15You can also read
