Key takeaways

  • With the 2024 election season already making headlines, voter preferences are likely to be influenced in part by the state of the economy and markets.

  • While stocks have seesawed over the course of the Biden administration, the S&P 500 recently hit all-time highs.

  • The U.S. economy has proved surprisingly resilient in the face of efforts by the Federal Reserve to slow growth in an effort to lower inflation.

Although the first primaries were held months ago, 2024’s presidential election is a long way from over. The coming months will be filled with campaign ads, rallies and debate of many issues, as voters assess the candidates and determine which direction they are leaning before the November election. Key among those considerations will be how voters perceive their financial circumstances. The state of the economy and markets will likely be key factors as well.

The U.S. economy is typically a chief concern for Americans, and it is often reflected in how they vote. On a broad scale, the U.S. economy has mostly demonstrated solid growth through much of President Joe Biden’s term (dating back to January 2021). Since early 2022, the economy has faced headwinds from Federal Reserve monetary policy, which included a dramatic interest rate hike that continued into mid-2023. The Fed pursued this strategy in an effort to combat the higher inflation that emerged in 2021. Through most of that period, the economy, as measured by Gross Domestic Product (GDP) has grown, though the pace of growth slowed in 2024’s first quarter.1

Chart depicts the U.S. economy's growth and contraction Q1 2021 - Q1 2024.
Source: U.S. Bureau of Economic Analysis, “Real Gross Domestic Product and Related Measures: Percent Change from Preceding Period,” April 25, 2024.

Also during this time, the U.S. labor market remained strong, wage growth began to exceed the inflation rate, and consumers maintained consistently solid spending, which proved to be the most important factor driving economic growth.

In addition, government spending was a positive contributor to economic growth. “Spending programs that passed in the first two years of the Biden administration had an influence on the rate of economic growth in 2023,” says Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management. These included an infrastructure investment package and the Inflation Reduction Act, which included incentives for green energy projects. Those dollars started to have more impact in 2023, and may again in 2024, according to Haworth.

As for the stock market during Biden’s tenure, it trended higher, but with significant volatility. The benchmark S&P 500 generated impressive returns of 28.7% in 2021 and 26.29% in 2023. Sandwiched in between was a bear market, as the S&P 500, at its low point, dropped 25% in 2022.2 The market in 2021 benefited from the U.S. economy growing at its fastest pace since 1984. However, rising inflation and the Fed's aggressive response to it, took a toll on stocks in 2022. 2023’s stock market recovery was narrower in nature, driven primarily by a small group of S&P 500 sectors dominated by technology-oriented stocks. In 2024’s first months, the S&P 500 reached new all-time highs, closing above 5,000 for the first time. It retreated a bit from peak highs in April, but has so far managed to generally stay near 5,000.

S&P 500 performance during Biden's presidency through February 16, 2024.
Source: U.S. Bank Asset Management Group as of April 24, 2024.

The bond market looks significantly different in the fourth year of President Biden’s term, compared to when he took office. This primarily occurred because the Fed hiked the short-term federal funds rate it controls significantly in a 16-month period. In response, yields on the benchmark 10-year U.S. Treasury note, which were below 1% at the outset of 2021, rose as high as 4.98% in October 2023, and by late April 2024 stood at 4.65%.3 While bonds generated negative total returns in 2022, returns were modestly positive in 2023.

Chart depicts yield on the 10-year Treasury note January 2021 - February 16, 2024.
Source: U.S. Department of the Treasury, Daily Treasury Part Yield Curve Rates as of April 24, 2024.

Interest rates and the economy drive markets

Although the political and policymaking environment draws headlines, particularly in an election year, they have not been major capital market drivers. Investors appear more focused on Fed policy, economic data and corporate earnings.

“We had much better economic growth than many expected in 2023, and that may continue in 2024, depending in part on how well the labor market holds up,” says Haworth. Markets appear to be increasingly focused on whether and when the Fed will begin lowering interest rates, with the expectation that such a move could improve the investment environment. The state of the economy will likely be a critical talking point as the election approaches.


A changing legislative landscape

President Biden, backed by a Democratic-controlled Congress, successfully passed a number of legislative initiatives in his first two years in office. The midterm elections in 2022 changed the legislative landscape. While Democrats maintained narrow control of the Senate, Republicans won a slim majority in the House. “With power split between two parties, legislative initiatives have been limited,” says Kevin McMillan, head of state and federal government relations at U.S. Bank. However, bi-partisan support in April 2024 led to approval of a funding package to, among other things, support Ukraine's military defense against Russia and to aid Israel as well in its conflict with Hamas. However, it took months to gain final passage of these and related measures.

“The market is currently at a wait-and-see point when it comes to the 2024 election, seeking more clarity about the candidates, possible election outcomes and the potential economic and market ramifications,” says Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management.

The political power divide led to contentious negotiations that resulted in last minute approval of an agreement to allow the government to issue additional debt, and to an overdue approval of the 2024 fiscal-year budget. However, the two parties did manage to reach agreement in both instances.

Haworth is skeptical that continued partisan differences in Washington will have a major impact on markets. There may be increasing interest in the election, with President Biden facing what is likely a challenging battle for a second term. Leadership of the House and Senate are also at stake on the November ballot. “The market is currently at a wait-and-see point about the 2024 election, seeking more clarity about the candidates, possible election outcomes and the potential economic and market ramifications,” says Haworth. “Once platform positions are more clearly stated, the markets may begin to look at which sectors stand to benefit based on who is ultimately elected.”


Positioning portfolios today

It’s important to note that several factors contribute to market performance, and it’s not strictly a reflection of the individuals who wield power in Washington or the outcome of any given election. Investors are best served by maintaining a broader perspective.

Depending on one’s goals and time horizon, today’s investor might consider:

  • A neutral allocation across fixed income, equities and real assets. The risk-reward dynamic has improved, highlighted by resilient consumers, a healthy labor market and stabilized corporate profits.
  • Within fixed income portfolios, tax-aware investors may wish to consider a modest allocation to high-yield municipal bonds and longer duration bonds.
  • For non-taxable fixed income portfolios, consider ways to enhance income with positions in non-agency residential mortgage-backed securities while managing portfolio total portfolio duration using long-maturity U.S. Treasury securities.

Regardless of how events play out during the 2024 election cycle, a sound investment strategy is to focus on a properly diversified portfolio that is attuned to your goals, time horizon and risk appetite.

Have questions about the economy, capital markets or your finances? Your U.S. Bank Wealth Management team is here to help.

Frequently asked questions

Related articles

How presidential elections affect the stock market

U.S. presidential elections naturally affect policy — but do they affect the market? Here’s a look at the impact election cycles have historically had on capital markets and what to watch for in 2024.

How to invest in today’s market

With inflation retreating and interest rate cuts likely coming later this year, how should investors position their portfolios to capitalize on potential opportunities, while guarding against risks?


Start of disclosure content
  1. Source: U.S. Bureau of Economic Analysis.

  2. Source: S&P Dow Jones Indices LLC.

  3. Source: U.S. Department of the Treasury, Daily Treasury Par Yield Curve Rates.

Start of disclosure content

Investment and insurance products and services including annuities are:
Not a deposit • Not FDIC insured • May lose value • Not bank guaranteed • Not insured by any federal government agency.

U.S. Wealth Management – U.S. Bank is a marketing logo for U.S. Bank.

Start of disclosure content

U.S. Bank and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.

The information provided represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific investment advice and should not be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation.

U.S. Bank does not offer insurance products but may refer you to an affiliated or third party insurance provider.

U.S. Bank is not responsible for and does not guarantee the products, services or performance of U.S. Bancorp Investments, Inc.

Equal Housing Lender. Deposit products are offered by U.S. Bank National Association. Member FDIC. Mortgage, Home Equity and Credit products are offered by U.S. Bank National Association. Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice.

Start of disclosure content

Diversification and asset allocation do not guarantee returns or protect against losses.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Stocks of mid-capitalization companies can be expected to be slightly less volatile than those of small-capitalization companies, but still involve substantial risk and may be subject to more abrupt or erratic movements than large-capitalization companies.

Stocks of small-capitalization companies involve substantial risk. These stocks historically have experienced greater price volatility than stocks of larger companies and may be expected to do so in the future.

The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issues of municipal securities. Interest rate increases can cause the price of a bond to decrease. Income on municipal bonds is free from federal taxes, but may be subject to the federal alternative minimum tax (AMT), state and local taxes.