 |
BEING STREET SMART by Sy Harding The Truth About Election Years! December 16, 2011. 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. And it makes sense. 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. The pattern was interrupted when the financial
crisis hit and 2007 and 2008, the last two years of the Bush Administration,
experienced a serious bear market. But the circumstances were unusual, and the
few times over the last hundred years that the cycle did not hold true to form
did not affect the long-term percentage of the cycle. 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. 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.
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. Coming next is my study of whether an election year has any
influence on the market’s annual seasonality of usually making its best gains in
the winter months and experiencing most of its serious corrections in the summer
months. Stay tuned!
Editors: You are welcome to quote from this article, or use it in its entirety, in your publication or on your website, as long as the credit in the above paragraph is also included. Readers are also welcome to e-mail, or print and snail-mail it to friends. These reports reflect our opinions and are based on our best judgment, but no warranty is given or implied as to their accuracy. Past performance does not guarantee future performance. Back to the Top Home Subscribe to RSS Feed
|
 |
