The comeback effect: Market responses to Trump's 2024 election victory

Abstract

We analyze the impact of the 2024 U.S. presidential election outcome on equity markets using an event study methodology. The results indicate significant abnormal returns in U.S. equities during the immediate post-election trading session, following Donald Trump's confirmed victory. However, this initial surge was followed by a modest reversal, suggesting fluctuating investor sentiment over time. Cross-sectional firm-level analysis shows that small-cap equities experienced the most notable positive abnormal returns. Sectoral analysis reveals varied responses: the energy sector saw substantial gains, likely due to anticipated regulatory shifts, while industries like chemicals had more moderate post-event reactions. These findings underscore the complex and varied market responses to significant political developments.