{"id":82896,"date":"2023-11-10T04:38:58","date_gmt":"2023-11-10T09:38:58","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/presidential-election-years-are-bad-for-stocks-dont-blame-trump-or-biden\/"},"modified":"2023-11-10T04:39:02","modified_gmt":"2023-11-10T09:39:02","slug":"presidential-election-years-are-bad-for-stocks-dont-blame-trump-or-biden","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=82896","title":{"rendered":"Presidential Election Years Are Bad for Stocks. Don\u2019t Blame Trump or Biden."},"content":{"rendered":"
\n

The election is over. It\u2019s time to get ready for the election. <\/p>\n

Blink and you might have missed the fact that voters, at least a few of them, went to the polls this past Tuesday to cast their ballots. This wasn\u2019t the year of a presidential election, or even a midterm, when control of the House and Senate are at stake. Instead, outside of a few states, the vote was for city council seats, judgeships, and other low-stakes positions and propositions. <\/p>\n

\n

There were exceptions\u2014and they were enough to get talking heads pontificating about what those results might mean for next year\u2019s presidential election. It seems voters will turn out to protect the right to get an abortion, or enshrine it in a state\u2019s constitution, as occurred in Ohio. And it also appears that a Democrat can hold the governorship in a red state, as long as that state is Kentucky. Virginia, meanwhile, wasn\u2019t quite ready to hand the keys to the state over to the Republican party, dealing a blow to Gov. Glenn Youngkin and his presidential aspirations, or so the pontificators explain.<\/p>\n

Yet all these results are just a sideshow compared to the looming main event in one year\u2019s time. It\u2019s widely expected to be a face-off between current President Joe Biden and former President Donald Trump, two candidates no one seems all that excited about. According to an NBC News survey of 1,000 registered voters conducted in September and cited by Deutsche Bank, respondents were very worried about Biden\u2019s age and Trump\u2019s legal woes. Don\u2019t expect that to change anything, though. \u201cDespite major concerns with candidates, the American electorate is likely to see a rematch of 2020,\u201d writes Deutsche Bank\u2019s Brett Ryan. <\/p>\n

According to Goldman Sachs data, the
\n S&P 500
\n has returned 7% over the 12 months before a presidential election, compared with 9% for other years. And since 1984, those results have been even worse\u2014just 4%, thanks to recessions that occurred near the 2000, 2008, and 2020 elections, versus 11% for non-presidential-election years. Exclude those recessions, and returns are still two percentage points lower than in off years. Ouch.<\/p>\n

We can even pinpoint when the odds are particularly stacked against investors. Raymond James strategist Ed Mills notes that from January to the run-up to the Super Tuesday primaries in March, the S&P 500 averaged a loss of 0.44%, while it averaged a monthly loss of 1.27% in the month heading into Election Day. The good news: The S&P 500 averages a 1.28% monthly gain once the election is over. \u201c[Markets] quickly play catch-up after election year uncertainty is resolved,\u201d Mills writes. <\/p>\n

These results have little to do with the candidates. History says to expect a rough year ahead for the stock market\u2014and not because of the candidates likely to be on the ballot or who the polls suggest might win. Ryan cites Deutsche Bank\u2019s own data showing that the \u201cpredictive value of polls is near zero\u201d until 300 days ahead of an election.\u201d Right now, it\u2019s all noise.<\/p>\n

Nor are the returns a response to anything fundamental. The U.S. economy has grown at a 3.5% clip during presidential election years versus 2.7% in other years since 1984, while S&P 500 earnings per share have grown by 9%, 1.5 percentage points more than in other years. \u201cElection-year equity returns are typically driven entirely by profit growth,\u201d Kostin explains. <\/p>\n

So what explains the poor returns? Chalk it up to uncertainty. Kostin notes that the S&P 500\u2019s price\/earnings ratio typically declines by 2% during the year before a presidential election, while the 10-year Treasury yield has fallen a median of 0.39 percentage point. The end result is a widening equity risk premium. In other words, investors are demanding more yield over ultrasafe government debt to hold stocks. And they\u2019re right to do so\u2014realized volatility is higher during these years as well, according to Kostin. <\/p>\n

We should be used to this by now. Polls will shift, hot takes will proliferate, and markets will move. But this too shall pass, and when it does, the market should do what it always does\u2014head higher. <\/p>\n

Write to <\/strong>Ben Levisohn at Ben.Levisohn@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The election is over. It\u2019s time to get ready for the election. Blink and you might have missed the fact that voters, at least a few of them, went to the polls this past Tuesday to cast their ballots. This wasn\u2019t the year of a presidential election, or even a midterm, when control of the […]<\/p>\n","protected":false},"author":1,"featured_media":82897,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-82896","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nPresidential Election Years Are Bad for Stocks. Don\u2019t Blame Trump or Biden. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The election is over. It\u2019s time to get ready for the election. 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