Presidential Stock Cycles

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Discussions about what will happen to the markets because of the fall presidential elections run the gamut from all out Armageddon to no effect whatsoever. I don’t for one second believe the latter. In my opinion what happens to the markets will likely happen before the November voting date. Polls will certainly forecast who is in the lead and likely to win but if the Trump election is any indication of what could happen, a close race will bring up memories of the ”Trump surprise” and it may indeed come
down to the wire.

Keep in mind no one can forecast market direction anytime, anywhere but we can draw on some historical patterns on presidential elections in general. The Presidential Election Year cycle is a study of market direction based on what year in an election cycle the market is currently in. Since 2020 is an election year, it’s the fourth year of the election cycle.

In the year a President begins his first term that is the first year in the election cycle. Going back over 50 years the third year holds the record out of the four year cycle for market gains for those wondering. The markets also generally fare well in the fourth year (that would be this year). A 7.5% average increase marks the fourth year cycle. In fact there was only one instance where the fourth year yielded a negative performance which occurred in 1948.

A democrat being elected on average yields a 5% average loss in that year while a republican newbie
yields a 9% return. Again, these are historical averages only and in no way an indication of what will
happen whoever wins the race to the White House.

In other concerns surrounding the political arena, the markets seems to not be too concerned with the move to impeach. Rumor has it impeachment is a fast track to a victory for somebody, but who that somebody is remains unclear. Some believe the impeachment machinations will cement a Trump win while others believe it’s the final nail in the election coffin. A vague observation for sure but so goes predicting the markets.

So as the turmoil continues to unfold around the White House, the plot thins and it goes back to really who knows. Not much help I know. Keep reading. The economic impact on the markets of an actual impeachment and the election results could jerk the markets any which way. Which leads us back to investing versus betting on an election or the Presidential Election Cycle theory.

Your best bet would be to not bet on who gets elected and instead continue to follow Modern Portfolio Theory (MPT). This means adequate diversification in your holdings and in my opinion maintaining some sort of exit strategy if things go south in a big way for whatever the reason. No one can predict market movements at anytime. Investing involves risk and you can lose money. Consult a qualified financial professional before making any investment decisions and do your own research before investing.

This article expresses the opinions of Marc Cuniberti and should not be construed as individual investment advice. No one can predict market movements. Investing involves risk. You can lose money. Mr. Cuniberti is an investment advisor representative through Cambridge Investor Research Advisors Inc. a registered investment advisor. California insurance license 0L34249

Marc Cuniberti

Marc Cuniberti hosts Money Matters Financial Radio and the Money Management Radio on KVMR FM and is carried on 66 stations nationwide. He is a financial columnist for the Union News and half a dozen newspaper publications. Marc holds a degree in Economics with Honors from San Diego State University. He is a registered financial advisor for SMC Wealth Management in Auburn, California. He holds California Insurance License 0L34249 and is the owner of BAP Inc. Insurance Services. He also owns Bay Area Process Inc., an engineering and services corporation. He is the founder and producer of the video series “Investing in Community” carried on NCTV and on 65 social media sites. He is also the founder and administrator of Money Matters, Investing in Community Video Series, Fire Insurance Information and Inquiries, Daily Laughter and Inspiration and Nevada City Peeps Facebook pages. He has appeared on NBC and ABC television and the subject of a host of TV documentaries for his financial insights, successfully calling the banking and real estate implosion of 2008 two years before it occurred. Marc holds a masters teaching certification in Tae Kwon Do martial arts and is a big brother for the Big Brothers Big Sisters program in Nevada County. He is presently media consultant for the IFM Food Bank of Nevada County.

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