Stock Market Performance in Post-Election Years

I often get made fun of by my staff for how little I watch the news.  I have CNBC on all day long, but the volume is turned down so I can’t hear what they’re talking about.  I’m watching for any big, breaking news that would be a potential detriment to our clients’ long-term retirement savings, but other than that… it’s mostly just noise.

 

Take this months’ Time Magazine cover, for instance.  I love the creativity and if we weren’t in the middle of a pandemic, I would actually think this was visually appealing.  Unfortunately, it looks more like another attempt at promoting public fear and negativity.

 

Time-Mag-Coronavirus-768x1024 Stock Market Performance in Post-Election Years

 

Instead, let’s look at some real numbers.  Below are two sets of numbers for each year of the four-year election cycle.  Up top, you have the average return of the stock market in each year of the cycle.  As you can see, the election year (which is the year we’re currently living in) is the #2 ranked year for total performance when comparing all four years.  The second metric is the percentage of years that were positive, and you can see that, in election years, 83% have been positive since 1926.

 

ROR-Presidential-Cycle-1926-19 Stock Market Performance in Post-Election Years

 

Next year – the post-election year – has the third-best performance (if you’re cup-half-empty, you could call it the “2nd worst,” I suppose), but it’s still not horrible when you look at the averages.  On the other hand, the fact that only 57% of post-election years have been positive is a little more concerning.

 

If we change the dates and look at more recent history, you can see (below) that since 2005, the picture is different, but rosier.  In the last 15 years, post-election years have had the best rate-of-return, on average.  Although, my problem with this table is the extremely small sample size.

 

ROR-Presidential-Cycle-2005-19 Stock Market Performance in Post-Election Years

 

I’ll get into more details next week, including stock market performance based on political parties.  There are only two weeks and a day before all this comes to an (eventual) end, even if it takes a few days, or even weeks to determine who our new government officials are.

 

Meanwhile, don’t let the news freak you out and focus instead on what the market is doing.  Is it going down?  No… but that would be a problem, wouldn’t it?  Is it going up?  Yes… it is, and even if it were going sideways, that wouldn’t be horrible.  In fact, I wouldn’t be surprised to see the stock market go absolutely nowhere for the next couple weeks.

 

But never mind the next couple weeks, the election, news, etc… enjoy what’s left of this crisp, fall weather, have fun with your families, and I’ll be back with another report next week!

 

Till next time…

Adam

 

 

Categories: Adam Koos, CFP®, CMT®, Market Commentary

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