How The VIX Reacts to US Presidential Elections?

It‘s normal for the VIX (the volatility index) to be high surrounding a presidential election. It’s like test anxiety. You study and you‘re like, “The test is going to be horrible” and then the test is over and the test anxiety goes away. It’s the same with elections. The election occurs on defined dates. You know who the person in power will be.

If you look at the VIX right before and after an election, youll see that the VIX tends to go a bit wild and then flatten out. Here are one of the most controversial elections in recent memory: Donald Trump in 2016. The VIX calmed down a few months after the election.

Here‘s a chart showing the VIX three months before and three months after the Trump’s surprise 2016 victory.

Source: YCHARTS

If the VIX is really high it means markets are likely to be lower in the near future, its a good time to buy and a good time to rebalance your portfolio. A high VIX signifies that“markets are really far away from their normal trading levels,” meaning that investors can find bargains during times of high volatility.