Historically, small-cap stocks have outperformed larger ones after presidential elections, and with November’s results providing more certainty for investors, professionals believe a turning point for smaller companies could be on the horizon in 2025 Mr.

Looking at trends in investment performance over the past three decades, American Century Investments vice president Mike Rohde said the small-cap Russell 2000 typically returns more than 23 percent after a presidential election.

By contrast, the Russell 1000 index — tracking the top 1,000 stocks — returned about 18 percent over the same time period.

"Commentators may thrive on drama, but businesses and markets don't like uncertainty." This may be one reason why markets tend to be volatile before elections and tend to perform better after midterm and presidential elections,” Rode said.

He added that the outperformance of small-cap stocks could stem from a variety of factors associated with each election cycle.

"While investors may gravitate toward the perceived safety of larger, more established companies amid political uncertainty, they may be more risk-averse once the election is settled," Rode said.

He advised investors to "expect the unexpected" during a presidential election year, suggesting that holding steady is often the best strategy.

"If history rhymes, we think markets could see some relief from the post-election rally with small caps poised to lead the way," the investment executive said.

In a recent market note, Francis Gannon, co-chief investment officer at small-cap specialist Royce Investment Partners, also noted that US small-caps historically shine in presidential election years.

Usually, outside of crises or major global events, political developments and stock market swings don't coincide with significant volatility, he noted.

However, Gannon stressed that the 2024 US election year is particularly "remarkable" for its unpredictability, marked by unprecedented events such as assassination attempts, an incumbent president stepping down, a new candidate entering the race and voting swings.

The stock market also experienced its own swings, including a brief shift to small-cap stocks in July as mega-cap names declined, followed by a significant selloff in early August.

"Although US markets have begun to stabilize, much remains uncertain going forward," Gannon said.

Still, this mix of market moves could signal an upcoming small-cap lead, he said.

"History rarely repeats itself -- but the small-cap Russell 2000 maintaining its edge over its large-cap sibling, the Russell 1000, is pretty striking in our view," Gannon said.

"So while recent events in both politics and the markets offer lessons about the importance of patience and caution, we're hopeful that small-cap investors will find plenty to cheer about no matter which way the election takes."