There’s a saying that with enough prodding, you can make statistics say whatever you want.
We believe this is especially true for the loads of data surrounding presidential elections. It’s possible to use the data to say two different things about the economy, depending on the point you’re trying to make.
For example, one analyst reported that since 1929, the S&P 500 gained an average of 1.58 percent in a president’s first year in office. Another claimed that since 1928, the first year of a new presidential term sees “the markets” rise by an average of 6 percent. Citing different indexes and years can change the story.
[CLICK HERE to read the article, “Why markets tend to fall during a presidential election year,” from CNBC, Jan. 13, 2016.]
In our opinion, the important thing to remember is that investing is personal. Trying to predict market performance based on the direction of prices, interest rates or presidential elections is not a sound long-term strategy. If it was, more people would be successful at doing it. Please remember that investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
This election year promises to have even more fireworks than usual, but don’t let national matters distract from your personal long-term financial goals. We’re help to help you stay on track. With that being said, take a look at what different analysts say about the financial markets and presidential elections.
[CLICK HERE to read the article, “What Investors Need to Know About the 2016 Election,” from Oppenheimer Funds, Jan. 8, 2016.]
[CLICK HERE to read the article, “How Do Stock Markets Perform during a Presidential Election Year?” from Yahoo Finance, April 1, 2016.]
If there’s one thing that is for sure, it’s that a presidential election year creates more market uncertainly than non-election years. Most analysts agree that markets tend to be calmer when an incumbent president is running for re-election, because one known entity is more reassuring than two unknowns. The same seems to hold true if the incumbent wins re-election. However, the stock market may trend downward in the first year of a new party taking over the White House.
It’s also probably true that, depending on which party is in control, certain industries may be positively or negatively affected. For example, if the next president successfully repeals the Affordable Care Act, the health care industry would be poised for changes.
[CLICK HERE to read the article, “How the Presidential Election Will Affect the Stock Market,” from Kiplinger, February 2016.]
At least one analyst has considered how a Donald Trump administration would impact the markets, ranging from higher import tariffs, which would make some products more expensive, to lower income taxes, which could prompt higher household spending in the consumer discretionary sector.
At the end of the day, it’s important to remember that dozens of factors impact the performance of the markets -- and most investors have absolutely no control over any of them. What’s important is that you stay focused on your long-term financial strategy with regard to whether it’s on track to meet your retirement goals.
[CLICK HERE to read the article, “How would a Donald Trump presidency affect the stock market?” from Los Angeles Times, March 7, 2016.]
Daniel Shub, AIF®, RFC®
Wealth Management Advisor & Founder.