Saturday , 10 December 2016


U.S. Stock Market Performance in Election Years – How Different Will It Be This Time?

In just a few weeks time, the ballots will be in for one of the most controversial elections in U.S.Trump history. The good news for investors is that historically, the market has performed well in election years with the S&P 500 ending up in positive territory 82% of the time. The bad news? This is clearly not a normal election.

The comments above and below are excerpts from an article by Jeff Desjardins (VisualCapitalist.com) which may have been enhanced – edited ([ ]) and abridged (…) – by  munKNEE.com (Your Key to Making Money!)  to provide you with a faster & easier read.  Register to receive our bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner.)

The aggregate data is clear – here’s how the S&P 500 does in different years of the presidency:

Year of Term Positive Returns Negative Returns
1 57% 43%
2 65% 35%
3 91% 9%
4 82% 18%

Even though the election year (Year 4) has positive returns 82% of the time, things obviously get murkier when we look at the current situation. Clinton and Trump are the two most disliked candidates in history, and third-party candidates such as Gary Johnson, Jill Stein, and Evan McMullin are polling relatively high in certain states.

The following infographic uses data from Fisher Investments to show how the S&P 500 historically performs during U.S. election years, as well as during the terms of specific presidents.

Some see a Trump presidency as a guarantee for extremely volatile markets, while others see a Democrat landslide as also posing a huge market risk. Meanwhile, there are all kinds of weird hypothetical situations that could occur that would likely give traders migraines.

One of these tail risk events was highlighted by Nate Silver in early October. It involves Gary Johnson winning his home state of New Mexico (where he is polling at 24%) and at the same time neither Trump or Clinton getting enough votes to win the Electoral College. It’s unlikely, but still possible.

No matter how the results shake out, this election year will have long-lasting implications for all market participants, and it is likely that many lessons will be learned by traders.

Leave a Reply

Your email address will not be published. Required fields are marked *