We analyze a multi-asset calendar anomaly around U.S. elections. Election day is neutral, but the following session delivers a systematic sell-off across seven ETFs. Shorting D+1 yields 1.86% p.a. with a Sharpe of 0.31, while Treasuries rally inversely. Simple, consistent, tradeable.
Every four years, something strange happens in the markets around U.S. federal elections. It's not about who wins or loses. It's about a predictable pattern that repeats across assets, and it's simple enough for anyone to trade.
Our previous research documented a robust pre-election drift. But the cross-asset pricing of its resolution—the day after—remained a mystery beyond SPY. So we built a diversified ETF basket spanning technology, emerging markets, real estate, high-yield credit, gold, oil, and foreign exchange. Seven legs, equal weight. Then we watched what happened on election day and the session that followed.
### The Setup: A Calendar Anomaly You Can Actually Trade
Here's the thing: election day itself is a dud. An equal-weight long on D0 earns just 1.03% per annum with a Sharpe of 0.19. We treat that as the control arm—we document it, but we don't trade it. It's the calm before the storm.
The real action comes on D+1. That's when the political uncertainty premium collapses, and every single leg sells off in unison. An equal-weight short on D+1 yields 1.86% per annum with a Sharpe of 0.31 and a maximum drawdown of -4.16%. Over 26 years, that's just 13 trading days. Thirteen days of work for a quarter-century of returns.
> "The market doesn't care who wins. It cares that someone finally did." — James Miller, Principal Trading Platform Architect & Strategist
### Why Treasuries Flip the Script
Intermediate Treasuries do the opposite. They sell off in the four days before the vote, then rally from D0 to D+2 with a Sharpe of 0.48. It's a clean inverse pattern, and it makes sense: investors flee to safety before the uncertainty peaks, then rotate back once the dust settles.
So what's the takeaway? Elections aren't just political events—they're trading events. The drift is real, consistent, and measurable. You don't need to predict the outcome. You just need to respect the calendar.
- **D0 (Election Day):** Neutral to slightly positive. Skip it.
- **D+1 (Day After):** Systematic sell-off across all seven legs. Short it.
- **Treasuries:** Sell before the vote, rally after. Ride the inverse.
This isn't about politics. It's about patterns. And patterns, unlike polls, don't lie.