The Best Election Year in Decades Will Only Get Better
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It’s election season, and you know what that means…
Let the mudslinging begin!
After the June presidential debate, I’m sure many are wondering not only who’ll win in November… but also what it will mean for markets.
Now, we all know that no one can predict the future…
However, history often teaches us lessons when we look back.
Given it’s an election year, we’re going to study a few awesome data points:
- First, we’ll dive into why it likely doesn’t matter (from a market perspective) who wins in November
- Next, we’ll look at why you want to own stocks in election years
- Finally, we’ll see why presidential election year 2024, in particular, is setting up for a big lift into the year-end
No matter if you’re a die-hard donkey or a hard-nosed elephant, you’ll want to pay attention.
Because history says this breathtaking rally is far from over.
The Best First Half to an Election Year in Over 4 Decades
We’re living in a historic time.
The S&P 500 clocked a 14.48% gain in the first six months of the year.
But what’s so unique about this massive runup is that it came during an election year.
Going back to 1952, the average first-half gain for an election year stands at 4.03%. 2024’s monster rip is the best going back to 1976, when stocks jumped 15.62%.
Below I’ve highlighted in yellow the year-to-date move… easily stunning the crowd:
Now, there are data-driven reasons to believe this strength continues into year-end. I’ll get to those in a moment.
But first, if you’re hung up on the unknown White House winner in November, I’m here to tell you that it likely won’t matter, as far as your portfolio is concerned.
I say this because when you study stock market returns by president, you find that most commanders in chief saw positive equity performance.
The below chart lists all U.S. presidents (back to 1925) and the average full-year S&P 500 returns during their administration.
There are a few observations:
- Most returns are positive, with the negative outlier being President Herbert Hoover, who oversaw the Great Depression. The average annual S&P return clocked in at a 25.6% drop.
- The largest equity returns came when President Calvin Coolidge was in office, with average annual gains of 23.8%… during the Roaring ’20s.
- Recent Presidents Joe Biden, Donald Trump, Barack Obama, Bill Clinton, and George H.W. Bush all saw double-digit gains.
If this chart tells me anything, it’s to focus less on the party when it comes to your portfolio. Just keep owning stocks, and let time work its magic.
But there’s more work to do…
If the party in charge doesn’t matter over the long run, then what does move the needle?
One answer lies in studying the presidential election cycle. By that, I’m referring to the four years of a president’s term: year 1, mid-term, pre-election, and election years.
From 1925 to 2023, election years like 2024 see the second-best performance, behind only pre-election years.
Here’s the breakdown of the average annual return of the S&P 500 by presidential election cycle:
- Year 1, averages a 7.1% gain
- Year 2, the midterm year, has the lowest average return with a 3.4% gain
- Year 3, the pre-election year, has by far the strongest annual returns of 14.7%
- Year 4, the election year, sports a healthy 7.5% performance
This graphic shows us that election years are not to be feared, but rather cheered.
And to take it a step further, year 1 for president-elect No. 47 is right around the corner… and on average you’ll get a healthy 7.1% gain.
Up to this point, you should be leaning bullish into year-end based on history.
But we can’t stop here! There’s one final piece of information that says 2024’s outlier performance sets us up for a very big back half.
Why Strong Election Years Are the Biggest Bull Signal
If we slice up election years and single out periods when the S&P 500 gained at least 5% through the first half, you’ll find that the second-half performance handily beats the average.
Bears may want to hide in their caves. What comes after a big first half… is an even bigger second half.
Since 1952, the S&P 500 gains 4.03% in the first half of an election year.
When you single out years when the first half gains are at least 5%, the second half averages a market-beating 7.12%:
This right here is the icing on the cake for me. Strength begets even more strength in election years.
As the months go on, and we get closer to November, don’t let the media scare you based on who might win.
That analysis doesn’t hold water when you study history.
Instead, focus on hard-hitting evidence that suggests otherwise.
We’re in the midst of one of the best stock market rallies in history… and odds are we have further to go.
Do yourself a favor and vote.
Also, do your portfolio a favor and keep betting on great stocks… that should never be up for debate!
Regards,
Lucas Downey
Contributing Editor, TradeSmith Daily
P.S. In yesterday’s TradeSmith Daily, editor Michael Salvatore showed how powerful seasonality can be in spotting short-term profits that beat the market.
Seasonality is such a powerful tool, and its potential runs so deep, that many traders devote their entire strategies to it.
One such trader in our extended network discovered seasonality early in his career… and slowly but surely learned to harness its greatest potential.
His name is Tom Gentile. And he was able to crack the seasonality code wide open with his proprietary Money Calendar.
This calendar clearly shows the stocks with top historical performance for nearly every day of the year. It gives him and his readers an edge unlike anything else.
And right now, Tom’s sharing an unusual, controversial message on the AI sector that’s entirely based on seasonality.
In short, buying and holding certain AI stocks could prove disastrous in the coming months… But trading the right ones, with the right seasonality data backing you up… could lead to 100% profits or more in 30 days or less.
Tom’s still broadcasting his warning here, but don’t delay – it’s coming down in the next few days.
Click here for the full details.