Wells Fargo reports that market weakness usually occurs in the two months preceding Election Day, with the S&P 500 averaging a negative 4.3% return in that time.

They clarify that for the last six presidential election cycles, this trend has been constant, with decreases in both small- and mid-cap indexes.

According to Wells Fargo, defensive industries like staples, utilities, and health care have historically performed well during these pre-election times.  

On the other hand, with average relative returns of -3.5% and -3.0%, respectively, industries such as real estate and information technology have fallen short of expectations.

Wells Fargo notes that robust returns and cyclical outperformance often follow the elections, even current pre-election pessimism. This implies that although precaution is necessary in the days leading up to election day, there can be chances for profit once the uncertainty surrounding the election subsides.

The bank clarifies that other variables, such as the policies of the Federal Reserve, also have a substantial role in the larger framework in which this election-related market behaviour takes place.

As the September Fed easing looks inevitable, focus has returned to the election's possible impact on the markets, according to Wells Fargo.

While the S&P 500 frequently experiences volatility in the months preceding US elections, the post-election period usually sees a recovery, especially for cyclical sectors as election-related worries are cleared.

(Sources: investing.com, reuters.com)