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Next year is a Presidential election year, and the stock market is almost always positive in election years. Right? At least that assurance has been a supposed truism for many decades, and repeated as fact each year in numerous interviews and financial columns. [Let’s explore just how correct those assumptions really are.] Words: 367
So says Sy Harding (www.streetsmartreport.com) in edited excerpts from his original article*.
Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has further edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
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Harding goes on to say, in part:
It makes sense [to assume the statement made in the opening pragraph] because, after all, the Four-Year Presidential Cycle has an unusually consistent pattern of the market experiencing most of its serious corrections in the first two years of a Presidential term and most often making a substantial recovery in the last two years… It also makes sense that election years would be positive as each Administration pulls out all the stops to make sure the economy and stock market are positive when re-election time arrives – but it’s just not true.
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I studied all election years since 1920, and here’s how the Dow fared in each. I included whether it was a Republican or a Democrat in the White House in case that made a difference [and below is a summary of what I found].
|
Dow |
|||
| 1920 | Wilson | Dem |
-32.9% |
| 1924 | Coolidge | Rep |
+26.2% |
| 1928 | Coolidge | Rep |
+48.2% |
| 1932 | Hoover | Rep |
-23.1% |
| 1936 | Roosevelt | Dem |
+26.1% |
| 1940 | Roosevelt | Dem |
-12.7% |
| 1944 | Roosevelt | Dem |
+12.1% |
| 1948 | Truman | Dem |
-2.1% |
| 1952 | Truman | Dem |
+8.4% |
| 1956 | Eisenhower | Rep |
+2.3% |
| 1960 | Eisenhower | Rep |
-9.3% |
| 1964 | Johnson | Dem |
+14.6% |
| 1968 | Johnson | Dem |
+4.3% |
| 1972 | Nixon | Rep |
+14.6% |
| 1976 | Ford | Rep |
+17.9% |
| 1980 | Carter | Dem |
+14.9% |
| 1984 | Reagan | Rep |
-3.7% |
| 1988 | Reagan | Rep |
+11.9% |
| 1992 | Bush Sr. | Rep |
+4.2% |
| 1996 | Clinton | Dem |
+26.0% |
| 2000 | Clinton | Dem |
-6.2% |
| 2004 | Bush Jr | Rep | +3.2% |
| 2008 | Bush Jr. | Rep | -33.8% |
Of the 23 election years 15 were positive, or 66.7%. However, ignoring whether or not they were elections years, over those 91 years 62 were positive anyway, or 68%.
Conclusion: The market was up in 68% of years overall, and 67% in election years. So, whether it was an election year or not had no effect on the market’s performance.
Of the 23 election years, the market was up 63.3% of the years when a Democrat was in the White House, and 66.7% when it was a Republican.
Conclusion: It makes no difference which party is in the White House at election time.
So it seems investors will not be able to rely on an election year ‘indicator’ to guide them through the market next year.
*http://www.streetsmartreport.com/comm3
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