How Past Elections have Affected the Market
With the election upon us many of you might be wondering how the stock market might react depending on who’s elected. So without further ado, here are some interesting statistics on market conditions prior to and after a presidential election. Currently (and unfortunately) we are going into this election with the DOW down approximately 30% YTD (as of 11/03/08).
Historically, election years have usually been good for the stock market; the average gain in the last seven months of the year was 7.2%. Overall, looking at market trends since 1945 the S&P 500 has posted an average gain of 10.7% during the 28 years a Democrat was president vs. 7.6% during the 35 years of GOP residency. While we cannot predict who will win the election or what will happen we can take a look at some historical trends in the market based on party leadership.
There have been 27 Presidential elections since the start of the Dow Jones Industrial Average in 1896.
- The Democrats have won 12 times and the Republicans 15 times with the white house switching parties 10 times
- During election years, the Dow has been down YTD on Election Day only seven times. Three of the seven times, the incumbent party was defeated.
The two months prior to Election Day the Dow, on average, has increased +1.92%.
- This year the Dow closed 9/2/08 at 11, 516.92 and closed 10/30/2008 at 9,180.69, this is a decrease of -20.28%
- When the current office is held by Republicans, the average is +0.6%
- When the current office is held by Democrats, the average is +3.5%
- When a Republican is elected, the average goes to +2.2%
- When a Democrat is elected, the average goes to +1.5%
In first Year of Elected President’s Term the Dow, on average, has increased +4.85%.
- When the White House stays Republican, the average increase is +8.2%
- When the White House stays Democratic, the average increase is +0.5%
- When the White House changes from Republican to Democratic, the average increase is +13.7%
- When the White House changes from Democratic to Republican, the average goes to being down -4.6%
Whatever the outcome is in the election, it seems as if the historical numbers are in our favor.
Jessica Slaters, Investment Advisor.
Source: www.stocktradersalmanac.com
