Precedent · Election
Election & Policy-Regime Shift
2016–2017
An election / policy-regime-shift archetype, generalized across major political turning points (deregulation, tax reform, trade and industrial-policy pivots). The market reaction is sector rotation plus a volatility spike into the event that resolves afterward — durable sector winners and losers rather than a broad index crash.
The signature
Each variable's peak deviation from the pre-event baseline, with the curve shape, the lag before it moved, and how long the recovery ran.
| Variable | Peak deviation | Shape | Lag / Recovery | Confidence |
|---|---|---|---|---|
| S&P 500 Modest post-resolution drift; sign varies | +5% | Step | 0d lag · 365d | low |
| Defense Equities Example of durable sector rotation on policy | +15% | Step | 0d lag · 540d | medium |
| VIX Premium into the date, resolves after | +50% | V | -30d lag · 90d | medium |
Methodology
A composite archetype (medium confidence). The signature is an uncertainty premium into the date that resolves after it: vol spikes ahead and falls once the result is known, while the index move is usually modest and the sector dispersion is large — energy, defense, healthcare, and financials reprice on the expected policy mix. Shapes: V (vol — spike into, resolve after), step (sector rotation).
What's different now
Read for policy-driven sector rotation, not index direction. Markets price the economic transmission — tax, regulation, tariffs, spending — not the headlines or the personalities. The tail is a regime shift large enough to re-rate whole sectors for years, not just trade around an event.