Elections Move Markets, or Markets Move Elections?
According to Ned Davis Research (NDR) The S&P 500 Index generated an average annual gain of 11.6% when the incumbent party won a presidential election since 1928 versus 0.3% gain when the incumbent party has lost. In the 17 presidential elections since World War II, the S&P index has gained an above average 9.7% when the incumbent party won, compared with a below-average gain of 2.2% when it has lost.
I offer these statistics only to say that numbers may never lie, but they don't always tell the complete story, and frankly what should this past performance matter to you at this point?
The numbers don't take into account how many years you have left to work before retirement or how much it will cost you to assist in providing for your grandkids education, only proper planning can do that.
In the current election cycle my research and analyst remains focused on how the economy and political decisions can affect the timelines and investment strategies my clients have in place for success. For example, certain fundamental factors such as monetary policy, corporate earnings, and oil prices should outweigh the fear of political developments on one hand, but on the other; proposals by the candidates genuinely could affect energy, national defense, trade and manufacturing and also healthcare concerns that may lead to changes in investment decisions.
So as much as we would like to be prepared or predict the direction of the markets based on election results, it is a more prudent indication that the financial markets respond more to economic conditions than to elections. Apparently, the markets perform well when the economy is in good shape, but favorable economic conditions do not guarantee the incumbent party an election victory.
Prepare well,
Earl Johnson, is a registered investment advisor representative with a focus on retirement wealth planning, with EverGreen Capital Management based in Omaha, NE.