We continue to receive many questions from clients interested to understand how the approaching election might affect markets. Below is a chart of the Dow Jones Industrial Average and its average performance during election years. All election years since 1900 have been plotted, the average of which is the solid black line on the chart.
As can be seen, the market tends to slide early in the year due to the uncertainty of the process, but improves as most of the negatives are already discounted or priced in at the point. Then there is often another dose of uncertainty, as candidates develop their general election platforms and unveil specifics of proposed policy changes, beginning in Sept/Oct before a rally into the end of the year. There is also a clear difference in performance if the incumbent party wins vs loses. The yellow line shows the market having a strong rally in the fourth quarter when the incumbent party (the Democrats in this election) wins. The red line shows the Sept-Oct period much rockier and a shallower recovery in the fourth quarter when the incumbent party loses.
The current year (the blue dashed line) is closely tracking the incumbent party winning trajectory. With Hypermind1, a prediction based website, showing Hillary Clinton more likely to win the elections (63% probability vs. Donald Trump’s 35%) it appears the market is predicting a Clinton win as well. Unless these odds begin to change, we continue to expect that the upcoming election will have a positive impact on the domestic stock market.
Past performance is no guarantee of future results.
Dow Jones Industrial Average is an unmanaged index which cannot be invested into directly.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
1 “Who will win the White House?”, hypermind.com, Sep.09, 2016
Stratos Private Wealth is a division through which Stratos Wealth Partners, Ltd. markets wealth management services. Investment advisory services offered through Stratos Wealth Partners, Ltd., a registered investment adviser. Stratos Wealth Partners and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only; and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Investing involves risk including possible loss of principal. Some of the information contained herein has been obtained from third party sources which are reasonably believed to be reliable, but we cannot guarantee its accuracy or completeness. The information should not be regarded as a complete analysis of the subjects discussed.
