INDIVIDU AL


NONPR OFIT n


P Drew


Kavanaugh, MBA, CFP®, VP Wealth Management


Sources: 1


2


The Market’s Vote


utting aside what political changes (or lack thereof) the upcoming election may provide, what do past elections tell us about stock market returns? According to Sam Stovall, chief equity strategist at S&P Capital IQ, since 1945, the average annual gain under a Democratic president is 9.7% versus 6.7% under a Republican president. But irrespective of the election results, the trend of stock market returns remains fairly positive. In a study by the Schwab Center for Financial Research, since 1950, the S&P 500 has produced


positive returns 81% of the time during election years; however, the first year of a presidential term is roughly a “coin toss” for producing positive returns (only 56%).1


Remember, stock prices are driven by future market earnings. While one particular candidate may be better for business, the markets are looking primarily for policy clarity. An election can impact the stock and bond markets; however, time has shown that with a diversified portfolio, any potential negative effects can be muted and positive gains capitalized upon.


MARKET PERFORMANCE BY YEAR IN ELECTION CYCLE2


ELECTION YEAR


Number of Up Years


Number of Down Years


Average Return


13 3


6.6%


ELECTION YEAR +1


9 7


6.5%


http://money.cnn.com/2015/10/28/investing/stock-market-democrats-republicans http://www.schwab.com/insights/stocks/how-do-stocks-perform-during-presidential-election-cycle Schwab Center for Financial Research with S&P 500 data from 1/1/1950 through 12/31/2015.


ambassadoradvisors.com • 5


ELECTION YEAR +2


11 6


7.0%


ELECTION YEAR +3


15 2


16.4%


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