As the US enters its election year, Jonathan Boyar, managing director at Boyar Asset Management in New York and Principal Advisor to the MAPFRE AM US Forgotten Value Fund, which is available through the MAPFRE AM Sicav based in Luxembourg, looks to what history says about stock market performance at such times.
I just received the latest edition of The Stock Trader's Almanac. I always enjoy reading the section devoted to stock market returns and the presidential election cycle.
While I am a fundamental long-term investor (who does my best to filter out the economic and political noise from my investment decisions) it would be foolish to completely ignore history as I agree with the quote, often attributed to Mark Twain, that "history doesn't repeat itself, but it often rhymes."
Below are a few interesting facts from this year's Almanac:
- Presidential election years are the second-best performing years of the four-year cycle producing losses of greater than 5% in only six of the thirty-two election years since 1896. It is worth noting that the incumbent party lost power in five of those elections years when losses exceeded 5%.
- The stock market as measured by the S&P 500 does better in years when a sitting president is running (advancing 12.8% since 1949) versus a loss of 1.5% when there is an open field.
- Regardless of which party wins the election, the last seven months of the election year have seen gains on the S&P in 16 out of the 18 presidential election cycles since 1950.
- When the S&P 500 is up from July 31st to October 31st during presidential election years, the incumbent party retains power 85% of the time going back to 1936. Declines in the S&P 500 during these same three months have seen a shift in party control in 89% of instances.
2024 promises to be anything but normal in terms of the presidential election, so counting on history may not be as instructive as in past instances. Investors should instead be laser focused on the companies they own and ideally take a time frame that surpasses a typical presidential election term.