Election 2024: Choppy Markets Ahead?

In the playground, when all the kids jumped on one side of the teeter-totter, it rarely ended well.

In investing, when all the investors move to one side of a trade, it can suggest that an uptick in market volatility is on the horizon.

In the chart, you can see that the percentage of bearish investors hit its lowest level of the year in early October. The AAII Sentiment Survey asks members what direction they feel the stock market will go in the next six months. At this point, they all are clustered on one side of the teeter-totter.

To be fair, bearish sentiment has bounced between 22 percent and 32 percent for most of 2024. But when this type of sentiment indicator reaches an extreme, that’s when I take notice–especially during an election year.

The AAII Sentiment Survey is just one tool that I look at as I evaluate the financial markets. By no means does the survey influence long-term investment strategies, but it can play a role in influencing short-term decisions.

Bottom line: It’s best to anticipate a higher level of market volatility in the weeks ahead as the 2024 election season comes to a close. But remember, volatility is part of the investing process.

^{AAII.com, 2024}