The Election Year Indicator

I don’t place a lot of faith in these kinds of stats, but it’s interesting to note how Election Year Indicator has performed.

The Election Year Indicator states that when the stock market rallies in the final three months before the election, the incumbent party wins. If not, the challenger wins. The indicator has been right 19 times in the last 22 elections.

(T)he election years of 1984, 1988, 1996, 2004 and 2012 all had market corrections of 7 percent or more and yet finished the year positive.

(…)

(Since) 1928, only four election years had losses of greater than 3 percent.

This year, the market started with its worst loss in history.

When the stock market moves higher, the incumbent party usually wins. That has been the case in 12 of the 14 elections since 1928.

Conversely, in the eight elections since 1928 when the S&P moved lower, the incumbent party lost seven times. The stock market has correctly predicted the winning party 19 out of 22 elections, Stack said.

Perhaps people don’t vote their wallet; they vote their 401(k).

Posted by on August 15th, 2016 at 10:46 am


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