The 2024 US presidential election, trump's victory, and equity market responses: Event-study evidence

Abstract

Donald Trump's victory in the 2024 US presidential election presents a unique opportunity to empirically examine whether and to what extent equity markets responded to it, given the stark policy contrasts between Donald Trump and Joe Biden on several important domestic and international issues, alongside the election’s narrow polling margins. We employ an event study approach, and returns on 27 equity indices from five geographical regions to gauge the impact of Trump's victory on the abnormal returns and cumulative abnormal returns. While we document negative abnormal returns in 21 of 27 markets on the event day (November 5, 2024), the post-victory market responses are considerably divergent, supporting the hope/fear hypothesis. That is, countries with strained ties to the Biden administration or more friendly relationships with the Trump administration exhibited positive and significant reactions to Trump's victory (e.g., Russia, Israel, Türkiye, and Pakistan), whereas those susceptible to Trump's policies (e.g., Germany, France, Brazil, Mexico, and South Africa) exhibited negative and significant responses. The effect on the transitional and intermediate markets—including Canada, Japan, Poland, and Colombia—is mixed, with both positive and negative aspects, but lacks significance. We demonstrate that the US presidential elections have far-reaching economic implications that extend beyond the US market.