The stock market is having its best election year ever

London
CNN
—

Traders could be forgiven for breaking out their glasses of champagne, even if 2024 is not yet halfway there.

U.S. stocks have surged from record high to record high this year: the S&P 500 has surpassed its own record 31 times since January. This equates to a new all-time high approximately every four trading days.

Investors shrugged off high interest and inflation rates, a chaotic political and global environment and general economic uncertainty to give markets the best start to an election year on record.

What is happening: Presidential election years are generally good for stocks.

The S&P 500 alone has generated an average return of 7% during presidential election years since 1952, according to LPL Financial. If we limit this to election years in which the incumbent president is running for re-election, the average rises to 12.2%.

This year, the index has already far exceeded these average gains. The S&P 500 is up 14.6% year to date, the best start to an election year on record, according to Goldman Sachs, and up nearly 31% from its October low 2023. at 4,117 points.

So why is this election cycle different from all the others before?

Gains are typically higher when incumbent presidents run for re-election, likely because investors crave stability. And this election is the first since 1892 where candidates from both major parties occupy the White House, notes Ed Clissold, chief US strategist at Ned Davis Research.

If one incumbent reduces uncertainty, then two incumbents Really reduces uncertainty. That could advance the typical year-end election relief rally, Clissold said.

A reason to celebrate: Not only do stocks increase, they rarely decrease.

It's been 333 days since the S&P 500 declined 2% or more, the longest period since February 2018, Goldman Sachs' Scott Rubner wrote in a recent note to clients. His outlook for the second half remains positive: a good first half means a very good second half, he wrote.

The impressive market rally continues, remarkable not only for its strength but also for its stability, Nationwides head of investment research Mark Hackett wrote Friday. [T]There is no reason why the steady rise cannot persist, especially as the tailwind of election seasonality approaches.

Last week's rally was broad-based, allaying some investor concerns that recent gains have been concentrated in a few big names like tech darling Nvidia, which is up more than 155% so far this year.

The equal-weighted version of the S&P 500 rose 1.12% and the small-cap Russell 2000 gained 0.79% while the tech-heavy Nasdaq was flat for the week.

The sustained gains are leading some analysts to raise their year-end targets for the S&P 500.

Scott Chronert, head of U.S. equity strategy research at Citigroup, raised his year-end target to 5,600 from 5,100 last week.

Analysts from Goldman Sachs, Barclays, Deutsche Bank and UBS also revised their expectations for the overall index upwards.

Yes, but: Market volatility during an election year tends to pick up in October and there are many months left in this cycle with potential surprises ahead.

Thursday is the televised debate on CNN between President Joe Biden and former President Donald Trump. There are plenty of opportunities to grab headlines and allow candidates to gain some momentum or see the situation reverse, wrote Deutsche Bank's Jim Reid.

It is also possible that investors will become complacent and begin to take the current bull market for granted.

The higher optimism remains, the greater the risk that it will turn into complacency and leave the market vulnerable to the next negative news story, said Clissold of Ned Davis Research.

A fall pullback fits well with potential earnings downgrades, the Fed's watershed moment and election uncertainty. The risk is that one or more of these catalysts proves more durable, turning a downturn into something more, he said.

A global vision: The United States is not the only country with an upcoming election. France and the United Kingdom face elections in the coming weeks. While opinion polls suggest the centre-left Labor Party is heading for a comfortable victory in the UK on July 4, the situation in France is much more uncertain and markets have been rattled.

French President Emmanuel Macron has called early legislative elections after the heavy defeat of his centrist Renaissance party by the far-right opposition in the European elections.

The first round of the French elections will take place on June 30 and the second round on July 7.

Political uncertainty is a near-term headwind to both sentiment (reflected by financial markets) and, now, activity, wrote Katie Nixon, chief investment officer at Northern Trust Wealth Management, of the upcoming elections. Until July, volatility can be expected in European equity and debt markets.

Alaska Airlines and its union of 7,000 flight attendants reached a tentative agreement Friday evening, concluding negotiations that lasted more than a year and a half, my colleague Chris Isidore reports.

Terms of the deal were not disclosed, although the union called it a record deal.

The deal likely contains a significant pay increase, which is a common demand in the airline industry and sought by unions whose members, in some cases, have not seen a pay increase in years.

In April, the union told members it was seeking pay increases of between 43% and 56%, depending on seniority, through 2026. These pay increases would include back pay covering a period dating back to a year and a half during which they worked under the union regime. terms of the previous contract.

In February, flight attendants from Alaska as well as American, United and Southwest held an unprecedented coordinated meeting.stakesdemanding new contracts.

Since then, Southwest flight attendants reached a deal that included an immediate 22.3 percent raise starting May 1 and $364 million in retroactive pay.

Meanwhile, American and United flight attendants are still looking for new deals. U.S. flight attendants have asked to be released from restrictions so they can go on strike, but even if granted, they would have months of cooling-off period before they could walk out, under the U.S. labor law. railroads.

Apple is banking on its upcoming AI features to boost iPhone sales, particularly in China, where demand is lagging.

But there is a problem, reports my CNN colleague Samantha Murphy Kelly, ChatGPT which will soon be integrated into Siri is banned in China.

In a presentation earlier this month, Apple (AAPL) showed off its proprietary technology called Apple Intelligence to power compelling new AI.features and announced partnership with OpenAI to also use its viral tool ChatGPT in a limited capacity. (When Siri is activated and needs more help responding to a request, ChatGPT can step in.)

The move shows how Apple is trying to accelerate the latest hot technology at a time when its tech competitors, such as Microsoft, Google, Meta and Samsung, have already found their AI.foot. A deal with OpenAI could help Apple close the gap.

But China is one of the first countries in the world to regulate the generative AI technology that powers these popular services. In August, the Cyberspace Administration of China, the country's main internet watchdog, deployednew guidelinesfor industry, requiring companies to seek approval before deployment. The organizationApprovedmore than 100 AI models in March, all from Chinese companies.

According toa reportAccording to the Wall Street Journal on Thursday, Apple is looking for a Chinese AI company to partner with before the planned launch of iPhones in September, but it has not yet reached a deal.

Apple did not respond to a request for comment.

The need to find a partner is quickly becoming apparent at a time when Apple's smartphone sales fell 10% in the first quarter of this year, according to market research firm IDC, largely due to the sharp decline in iPhone sales in China. The company lost momentum in China as nationalism, a tough economy and increased competition also hurt its sales. China is the company's second largest market.