Thursday , 19 October 2017


What Does 2012, as an Election Year, Mean for Stock Market Returns? Here Are the Facts

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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Related Articles:

1. What Do the Presidential and Decennial Cycles Infer Will Happen in 2012?

 

Should we jump into the market now? [Let’s take a look at the 178 year history of the 4-year Presidential Cycles and the Decennial (10-year) Cycles and see what they suggest might well unfold in 2012.] Words: 1174