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How the stock market may react to a Contested Election (Preview)

By Lawrence G. McMillan

There has only been one contested election since listed options have been trading – the 2000 election between George W. Bush (43) and Al Gore. Election day was November 7th, 2000. The accompanying charts, courtesy of tradingview.com, show the pertinent time period. The three months August, September, and October “+” – as shown in the table at the beginning of this article – are noted in blue on the $SPX chart of 2000. There had been a good rally in August, but that had been completely reversed by mid-October. Then a late October rally brought $SPX back almost exactly to where it had been on July 31st – meaning that the three-month period was essentially a “wash.”

As soon as the election was over, it became apparent that the State of Florida was so close that a recount was needed. That’s when the legal wrangling began: what was a valid ballot? The term “hanging chad” was introduced to most Americans. A “chad” is apparently that little rectangular piece of a punch-card that you punch out. Sometimes if you don’t completely pull it off the card, it’s still “hanging there.” Does that count? These and other issues were eventually brought to court. The case went quickly all the way to the Supreme Court of the United States (SCOTUS). There were actually a couple of cases. On Friday, December 1st, SCOTUS ruled on a case in Palm Beach County, Florida (a heavily populated county). Their decision was favorable to Bush, at the bottom line. I remember that they announced their decision on a Friday, between 4:00 and 4:15 pm eastern time. In other words, the stock market was closed but the S&P futures were still trading! Ugh. In any case, the market...

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