As 2023 wraps up, investors are looking ahead to 2024 and how the presidential election will impact the market. As part of Yahoo Finance's 2024 Investor Guide, LPL Financial Chief Equity Strategist Jeff Buchbinder joins Yahoo Finance to discuss how the 2024 presidential election may impact the market and how recessions have called previous elections.

"We expect gains next year. That would be consistent with the historical pattern," Buchbinder says. "The economy is really the biggest driver... of not just how elections turn out but how markets do... If we continue to have surprises on the U.S. economy, like we've had in 2023, then no doubt this market could do... quite a bit better than that historical average."

"The recession is actually a perfect 17 for 17 calling elections," Buchbinder explains. "If you have a recession in the two years leading up to a presidential election, the incumbent loses. If you don't, the incumbent wins."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

JOSH LIPTON: We're looking ahead to next year and how investors can prepare their portfolios as they we're focusing on the presidential election. If history tells us anything, election years tend to be solid for the markets and even indicate who could win the race for the White House. As part of our 2024 investor guide, we ask what does the political cycle mean for markets and what will be the best play?

Jeff Buchbinder, financial chief equity strategist at LPL joins us now. Great to see you. Maybe just listen, big picture, walk us through what the election can mean for investors.

Lots of already balls in the air next year, Jeff. We got the Fed, the economy, geopolitical risk. How should investors think about a presidential election?

JEFF BUCHBINDER: Yeah, well, first thanks for having me on. So certainly we expect gains next year. That would be consistent with the historical pattern, right? On average in an election year, the S&P 500 is up about 7%.

Now, that pales in comparison to what you typically get in year three, right? The pre-election year as we saw this year is the strongest of the four years. The average gain has been 17% and we're going to do certainly well north of 20%. So sure, it's good, but I think a little bit of political uncertainty in general creeps in.

And you have a little bit more of a choppy market. Maybe upwardly trending, but still choppy. And there's certainly fundamental reasons to expect a little bit of chop as we go through 2024 with valuations a little bit higher. The economy poised to slow.

I will make one point up front here about the economy. If you look back at history, the economy is really the biggest driver, right, of not just how elections turn out, but how markets do. So if we continue to have surprises on the US economy like we've had in 2023, then no doubt this market can do quite a bit better than that historical average.

JARED BLIKRE: Let me ask you about the economy here. Big talk in 2023 this year has been recession, did not materialize. But whether or not there is a recession can be very predictive of whether or not-- of who wins the next presidential election. And we still have a year left or not quite a year left until the election, but enough time for something to develop. Could you talk to me about some of the stats surrounding recessions and their influence on the presidential election?

JEFF BUCHBINDER: Yeah, heavy influence no doubt. The recession is actually a perfect 17 for 17 calling elections. If you have a recession in the two years leading up to a presidential election, the incumbent loses. If you don't, the incumbent wins.

So hard to say whether we're going to have a recession next year. This is maybe a coin flip. But if we do, that's going to be a real tall hill for President Biden to climb. Now, if there is any year where you would think of maybe a recession could be mild, maybe some one offs, the uniqueness of this economic cycle could actually lead to a situation where you have a short, mild recession and Biden potentially gets reelected. We've seen it throughout this cycle that the post-pandemic period has been unusual and very difficult for economists and strategists to predict.