Will Joe Biden's speech on the presidential inauguration excite the market?
President-elect Joe Biden inauguration will be held on 20th Jan 2021. Market believes he will deliver an encouraging speech to reunite the country and share his vision on the US government policies in the next 4 years. We have studied market data points before and after the past 7 presidential inauguration and found that presidential inauguration did have an impact on the market.
S&P generally performed better after Presidential Inauguration day, thus higher probability to close above that of Inauguration day (see Figure 1). In the past 7 Inauguration, S&P had 100% chance to close above Inauguration day on the 10th trading day after Inauguration (i.e. 3rd Feb 2021) and 86% chance above on the 3rd trading day (i.e. 25th January 2021). We expect such phenomena because the US President's first speech should normally excite investors and the capital market.
Figure 1: S&P500 - probability above Presidential Inauguration day
Source: Invbots.com
* Red shaded areas highlight events with significant probabilities (> 80%, < 20%)
On the contrary, US 10-year Treasury Yield (US10Y) generally closed higher than on Inauguration day (see Figure 2). In the past 7 Inauguration, US10Y had 86% chance to close above Inauguration day on the 5th trading day after Inauguration (i.e. 27th January 2021). Historically, global investors sold treasury after Inauguration, thus leading to the rise of US10Y
Figure 2: US10Y - probability above Presidential Inauguration day
Source: Invbots.com
* Red shaded areas highlight events with significant probabilities (> 80%, < 20%)
Finally, the US dollar index (DXY) generally performed weaker before Inauguration day (see Figure 3). In the past 7 Inauguration, DXY had 14% chance to close above Inauguration day on the 3rd trading day before Inauguration (i.e. 14th January 2021) or 86% chance to close below Inauguration day. However, the pattern on DXY was not clear after Inauguration. Historically, global investors bought US dollars before Inauguration.
Figure 3: DXY - probability above Presidential Inauguration day
Source: Invbots.com
* Red shaded areas highlight events with significant probabilities (> 80%, < 20%)
US Presidential pattern generally performed in this election. The following table shows good predictions.
Figure 4: Presidential impact on S&P during US election 2020
In conclusion, the past 7 election data points showed S&P will have a high chance to perform well and the US10Y will generally rise after Inauguration.
