Maybe you’re biting your nails about the November 5 election. Wall Street isn’t. So far, market reactions to election-related drama have been minimal.

Remember, there’s only one political party in America: the capitalist party. And right now, capitalism is doing just fine, thank you.

Last week, stocks reached new all-time highs, driven by optimism surrounding the Federal Reserve’s recent interest rate cut as well as monetary loosening by central banks around the world.

Continued enthusiasm for artificial intelligence (AI), expanding breadth in market leadership, and robust corporate earnings growth are additional factors fueling the rally.

That said, I anticipate more volatility as election day nears and attention intensifies on policy proposals and the differences between candidates. Historically, volatility tends to rise in the lead-up to elections but often dissipates quickly, as investors refocus on key economic and market trends. Bullish conditions should remain steady regardless of who occupies the White House.

Of course, the contrasts this year between the Democratic and Republican candidates are stark. Bur for investors, the larger takeaway is that markets have historically thrived under both political parties, a trend that’s unlikely to change.

No matter who wins the White House, the odds are we’ll get divided government in Congress. A divided Congress acts as a safeguard against extreme policy shifts, allowing markets to continue benefiting from prolonged economic growth and rising corporate earnings, both of which have been consistent drivers of market performance.

Wall Street typically prefers divided government. When power is split between different parties, it becomes harder to pass aggressive policies, whether they involve major tax changes, regulatory overhauls, or shifts in government spending. This political balance tends to result in more moderate policies, which fosters a sense of stability and predictability in the business environment.

One potential risk is the possibility of a contested election, but measures have been put in place by Congress to mitigate the potential of another January 6 insurgency.

As we approach this year’s election, the market has remained strong. Stocks posted gains for the sixth week out of the last seven, with the S&P 500 up by 11% since early August alone (see chart).

This doesn’t mean markets are indifferent to political winds, but they are more focused on Fed policy, where there’s been more clarity recently.

What’s more, corporate earnings are accelerating, supporting higher valuations and stock prices, while broadening the scope of the current bull market.

One year after an election, the stock market has averaged gains of over 10%. The worst post-election years were 2000 (-21%) and 1956 (-10%), while the best were 2020 (40%), 1996 (35%), and 1960 (32%). Stocks are positive nearly 70% of the time in the year following elections.

Overall, markets have consistently delivered strong returns under both parties, with broader economic conditions playing a larger role than political leadership.

On Monday, the main U.S. stock market indices closed higher as follows:

• DJIA: +0.04%
• S&P 500: +0.42%
• NASDAQ: +0.38%
• Russell 2000: +0.24%

The benchmark 30-year U.S. Treasury yield climbed 0.88% to settle at 4.13%.

Read This Story: How to Beat Wall Street…Under All Investing Conditions

For investors, this is a perfect storm of good news. But volatility will stay with us into the foreseeable future, amid a slew of headline risks. Geopolitical strife in the Middle East and Eastern Europe remains a wild card. The stock market rally has plenty of fuel left, but it’ll be a bumpy ride along the way.

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John Persinos is the editorial director of Investing Daily. You can reach John via mailbag@investingdaily.com

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