Elections, War, AI: What Moves Markets...And What Doesn’t

Hey folks,

Let’s play a quick game.

You wake up. Flip on the news.
You hear:

“A close presidential election with major policy consequences!”
“Conflict escalating in the Middle East!”
“AI is changing everything…Are you ready?”

And somewhere between your coffee and your doomscrolling, you start thinking…

“Should I pull out of the market? Should I buy more? Wait… is now a good time to panic?”

Okay, Okay...Calm! Slow down.
While these headlines feel like market-moving bombs, the truth is… some things shake the markets…most don’t.

Ummm…Okay, now we unpack what's actually moving the markets…and what’s just drama.

Elections: Volatility Drama, Long-Term Steady

We all love a good election year drama. Red vs. Blue. Bulls vs. Bears.
But if you're wondering whether elections really move the markets, here’s a shocker:

Historically, the market doesn’t care as much as you think.

Yes, volatility tends to rise in the months leading up to an election. Investors hate uncertainty. But over time…the S&P 500 has usually posted positive returns regardless of who wins.

In fact:

• In 17 of the last 23 election years since 1928, the S&P 500 ended the year in the green. (Source: Comperio)

• Post-election rallies are surprisingly common…especially if the result is clear.

• According to LPL Research, the average return in election years since 1952 is around 6.5%

• FT Portfolios shows a broader election-year return range, often 7–11%, depending on pre/post-election breakdown.

Elections tend to stir the pot short-term…but long-run, markets mostly keep climbing.

Q3 (especially in election years) tends to be weaker due to uncertainty. But Q4 (post-election) often shows a strong rally once the outcome is known. Stock Trader’s Almanac highlights a “post-election year effect” where markets generally perform well the year following a presidential vote.

So, instead of stressing over who’s winning debates, focus on the policies that may affect earnings (For example: taxes, healthcare, clean energy subsidies).

War: Scary Headlines, But Markets Adapt Fast

War feels like the ultimate market doomsday trigger.
And sure, when conflict erupts, markets do react…briefly.

But here’s the surprising part: they usually bounce back. Fast.

Average pullback is only around 10% in the initial days…then rebounds within a year by ~11%. (Source: Bull Run Investment Management).

Examples:

• Deutsche Bank analyzed 32 major geopolitical events since WWII (After Pearl Harbour) and found an average S&P 500 drop of ~6%, with full recovery in about 16 trading days, and a ~15% rally over the following year. (Source: Business Insider)

• Other studies show similar patterns: average drawdowns of 4–5% over ~19 days before bouncing back. (Source: Fxempire)

• Iran-Israel: Oil prices initially spiked (~7–8%), but crisp news like the cease-fire announcement led to sharp reversals—oil plunged ~12% in a week, easing inflation fears and fueling equity gains. (Source: MarketWatch)

• S&P 500 and global equity futures shrugged it off—on the day of news, U.S. futures and Canada's TSX notably strengthened as investors sensed containment.

• Russia-Ukraine: Markets stumbled… then surged within weeks, especially tech and energy.

Why? Markets are “forward-looking.” Once the initial shock is priced in, investors pivot to earnings, policy, and rebuilding fundamentals.

Takeaway: Wars may rattle nerves, but don’t usually derail growth—unless they hit oil or inflation hard.

AI: Hype Is Loud…Profits Still Whisper

AI is everywhere now…Nvidia ($NVDA), Microsoft ($MSFT), even random startups with ‘AI’ appended for the sake of hype.

It’s true: AI is changing how we work, search, invest, create, and even write emails like you do.
But does that mean every company shouting “AI!” is a goldmine?

Not exactly.

Look at two sides of the spectrum:

• Nvidia, Microsoft: Clear winners with revenue backing the hype.

• Random small-cap stocks with ‘AI’ in the name: Pure speculation, often with no earnings to show for it.

But here’s what’s real:

• Big players like Nvidia and Microsoft are seeing massive revenue growth tied to AI. (Source: Barron’s)

• Nvidia alone posted $44 billion in sales last year, with data‑center revenue up 73%. It now commands nearly 45% of Nasdaq‑100 value. (Source: CincoDias’)

• But as the FT points out, massive capex—$95 billion in 2024 and another $75 billion planned…means it's still early days on ROI. (Source: Financial Times)

Analysts project AI capex could hit $1.7 trillion by 2035, mirroring past cloud/computer revolutions.

So yeah, AI is real, but don’t chase every “XYZ‑AI” stock. Stick with companies turning hype into actual profits.

What Normally Doesn’t Move Markets?

(Even If Twitter Thinks It Does)…

• Social media rants & viral financial hot takes

• In‑line CPI prints or Fed minutes (unless unexpected)

• Celeb tweets hyping “buy the dip”

• Headlines with zero impact on future cash flows

Sure, they create noise. But the market doesn’t care unless the story changes the numbers.

So…What Does Move Markets?

1. Policy shifts – especially on rates, taxes, spending

2. Fed surprises – action matters more than words

3. Earnings & forward guidance – revenue growth, margin compression, real growth speaks louder than hype

4. Tech breakthroughs turned into profit – think AI that pays the bills

5. Supply-chain shocks or big commodity moves – e.g., oil spikes

That’s it. That’s the magic.

Bottom Line

Next time the headlines are screaming…pause, breathe, and ask: Will this change future earnings, policy, or cash flows? If not, treat it like noise.

Stay calm, stay curious, and keep questioning the headlines.

P.S. Heard a wild “market-crashing” take recently? Hit reply…We might feature the funniest one (anonymously, if you’d want) in our next issue.