Good morning! The S&P 500 hit its 46th record high of the year Monday.

Historically, the index takes 709 trading days to reach its bull-market high, according to market data cited by the Wall Street Journal.

This current bull run is just over 500 trading days young — and the presidential election actually suggests more upside ahead

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Volatility defines election-year markets

Markets prefer stability over surprises.

It’s no wonder stock market history suggests volatility is about to ramp up.

Changes to White House policy, economic strategy, and regulations can fuel jitters among traders. Markets have reflected those uncertainties for just about every election year dating back decades. 

“We’re now heading into the second half of October when volatility tends to rise in election years,” Morgan Stanley strategist Mike Wilson told clients Monday. 

The CBOE Volatility Index (VIX) — also known as Wall Street’s fear gauge — tracks the volatility of the S&P 500.

On Monday, it hovered just below 20. 

At the start of August it had spiked to levels only seen during 2008 and at the start of the pandemic.

Across the previous eight presidential elections, the monthly VIX averaged 20.7 during election years, above the 19.4 seen in non-election years, according to data from Stifel. 

This year, the VIX since the start of September has averaged 18.6. 

Notably, the September-to-October stretch of election years has seen the VIX increase by an average of 25%.

Meanwhile, the VIX has declined in that period during non-election years.

Historical data suggests the VIX will keep climbing in the coming weeks before seeing a sharp drop-off after the election, as the following charts from Morgan Stanley illustrate.

What about stock performance? 

While the S&P 500 has seen its best election-year performance since 1936, investors remain split on which political outcome would be the best for portfolio returns. 

Some Morgan Stanley clients consider a Republican sweep — less regulation, extended tax cuts — as the best scenario for stocks.

Others view a Trump victory plus a gridlocked Congress as a better result, as it would limit fiscal expansion. 

“There is also a contingent that sees a Harris win with a divided Congress as the best scenario for stocks,” Wilson said.

“The thinking among this group is that this outcome would still yield a tax cut extension but would not introduce tariff risk to the growth backdrop in a meaningful way.”

Taking a six-month outlook, Morgan Stanley considers a split scenario better for stocks compared to a sweep.

Either way, the S&P 500 tends to perform better in the six months after an election compared to the six months before one. 

As you might suspect, however, trying to pin down stock returns by sector or name gets trickier. 

“There’s no repeatable pattern of individual sector winners and losers during election years,” Stifel analysts wrote in a recent note. “That said, consistent with the broader index analysis, all sectors tend to be higher 12 months after the election.”

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Elsewhere:

✂️ Fed Governor Waller wants mild cuts. The central banker said Monday that upcoming interest-rate adjustments will be less aggressive than the jumbo move in September: “Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year.” (CNBC)

📈 Nvidia stock hit a new record. The chipmaker jumped 3% Monday, fueled by ongoing good news and positive reports from various Wall Street firms. With a $3.4 trillion market cap, Nvidia is closer to unseating Apple as the world’s most valuable company. (Yahoo Finance)

🚀 Trump Media stock is surging. The parent company for Truth Social is riding an epic rally of roughly 150% in the last three weeks. On Monday alone it spiked over 18% — which most market-watchers chalk up to Trump’s improving election odds across betting markets. The social platform also announced the launch of a separate website for its streaming service. (CNBC)

Rapid-fire:

Betting market election odds, according to $7.2 million in wagers on Kalshi

Last thing:

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