The initial upshot was that, using data from 1928 through Sept. 20 of this year and encompassing 22 full presidential terms plus one year under Coolidge, two things were apparent …
First, up until President Obama took office, the first year of a presidential term was generally the worst for stocks … with a typical gain of just 4.1%.
However, 2008 bucked the trend so hard — with a 23.4% surge — that it brought the entire cycle average up enough to move into second place.
Second, the third year of a presidential term remains the best one for stocks by a huge margin, with an average gain of 12.8%.
Thus, based on this single study, we might expect relatively muted gains from stocks in both 2017 and 2018.
Of course, people always want to know more. They want to go deeper. Especially in such a hotly contested, emotionally charged race like the one we have right now.
So I just published some new insights in the latest issue of my Income Superstars newsletter, and I am going to share them here today as well.
But before I do, please note that I am NOT sharing this information to influence anyone’s vote one way or the other.
Nor am I injecting any of my own views or opinions into this analysis.
This is just pure data … take from it what you will.
With 41 years of Republican leadership plus 48 years under Democrats in the spreadsheet, the most obvious — and controversial — way of viewing the presidential cycles is through party lines.
On that count, the data is rather clear: Throwing out the Coolidge year, and sticking to full presidential terms, the stock market has historically risen far more under Democrats than Republicans.
All told, the average S&P 500 gain under Republican presidents has been 3.1% vs. 10.4% under Democrats.
Looking at it in each individual year of the president’s term, the market has averaged double-digit returns in the first (11.91%) and third (14.67%) years under Democrats, with the most-tepid performance in year two (5.59%).
The only negative year was the first one under Republicans, with an average loss of 2.78%. Republican presidents have typically seen the lion’s share of market gains come in the third year of their given terms.
Now, when I examine the individual years that drive this data, I certainly feel sorry for guys like Herbert Hoover. The market dropped every single year he was in office – racking up losses of 11.91% … then 28.48% … then 47.07% … and then 15.15%!
That single string during the Great Depression goes a long way toward skewing all the Republican numbers I just cited, which is why I wouldn’t make too big of a deal out of this particular Democrats-vs.-Republicans study.
You might also be interested to take a quick look back at the last eight years under President Obama. This was a unique period of time because of the financial crisis hitting in 2008 and 2009.
The market has gained an average of 12% per year under Obama, though 2011 and 2015 were throwaways.
What’s even more interesting is that each of those were third years in the successive terms … completely reversing the larger trend we’ve seen throughout history!
One other factor to consider? The relationship between the political majority in Congress and the affiliation of the sitting president. That might prove especially important in 2017 and beyond, and it’s something I plan on addressing in a future issue of Income Superstars.
For now, no matter how I slice the data, it doesn’t suggest a banner year in 2017. So vote however you like without any added guilt from stock market history.
This article is brought to you courtesy of Uncommon Wisdom Daily.