History teaches: how does the stock market react the morning after elections?

A study by the Tel Aviv Stock Exchange examined the response of indices in the last ten election campaigns (2003-2022). The findings show rises on the first trading day, declines in the following week, and average gains of about 1.7% after a month. Volatility jumps by up to 45%. The recommendation for long-term investors: ignore the background noise.

A new study by the research unit of the Tel Aviv Stock Exchange examined the behavior of the TA-35 and TA-125 indices during the last ten election campaigns in Israel, between 2003 and 2022. The findings reveal a recurring pattern: on the first trading day after the elections, initial optimism is recorded, with the TA-35 index rising by an average of 0.58% and the TA-125 by 0.52%. However, by the end of the first week, optimism gives way to declines, with a cumulative negative return of 0.89% for the TA-35 and 0.67% for the TA-125. After a month passes, the picture reverses again, and both indices show an average cumulative positive return of about 1.7%. It also emerges that volatility in the leading indices jumps by up to 45% in the weeks following the elections. The research unit estimates that the closing of the polls does not end the uncertainty but changes its nature, as attention shifts to the formation of the government and its ability to pass a budget. The recommendation for long-term investors is to ignore short-term background noise and not change their investment strategy based on political developments.