Market Volatility Around US Presidential Elections

A Look at Past Elections and Why This Time is Different

Executive Summary

As we head in the 2020 U.S. presidential election, we are in an environment of heightened political discourse. We are also heading toward an election where many predict a delay in calling the election due to a substantial increase in mail-in/absentee balloting and a potential for contested results. This is all happening in a year of already heightened volatility given COVID-19, albeit down from spring levels.

Typically, volatility increases as we head election day and then comes down after. Market participants are wondering what 2020 will bring. Inside this note, we update trends on the path of volatility in 2020 and compare volatility patterns in prior election years to extrapolate what could happen over the next few weeks. We highlight the following (through October 19):

  • YTD 2020 VIX: avg. 30.26, +96.6% to FY19; peak 82.69, +224.9% to FY19; trough 12.10, +4.9% to FY19
  • October 2020 VIX remains elevated at 27.22: +95.2% to January average, but -52.9% to March peak
  • Compared to 2019, monthly average VIX trended 98% above last year
  • While 2020 exhibits heightened volatility, it is not the highest on record
    • 2008 was the highest average at 32.69, +8.1% to the 2020 average
    • Yet 2020 does hold the highest peak on record at 82.69
    • 2008 not the same – VIX peaked in the spring in 2020 but in the fall of 2008
  • Highest November average VIX in elections years were during times of market turmoil: 2008, the global financial crisis (VIX 64); 2000, the bubble burst (26.38)
    • 2020 YTD average +7% to November 2000, -51.7% to November 2008
  • October and November volatility versus the annual average:
    • October < full year 57% of the time
    • November < full year 71% of the time
    • November > October 57% of the time
  • Election day VIX: > two trading weeks prior to the day; declines after election days and continues to settle over the next two trading weeks
  • Does the winner matter? No discernable VIX pattern whether or not an incumbent wins or not, nor if the winner is a Democrat or Republican (incumbent race 57% of time periods analyzed, won 75% of the time)

Will 2020 be different? Disappointingly, the one example of questions around vote counting was in 2000, which was already experiencing turmoil from the bubble burst. While it is difficult to separate other contributing factors from election related volatility, 2020 VIX could continue its wild ride over the next few weeks.

Report sections include:

  • Recapping 2020 Heightened Volatility
  • Volatility Patterns in Election Years
  • And more



Companion Note


Katie Kolchin, CFA
Director of Research
SIFMA Insights