Pre-Election Years Are Traditionally Optimistic for Markets; Will 2023 Be an Outlier?

  • The S&P 500, Dow Jones, and Nasdaq have all executed properly in pre-election years
  • With a tumultuous yr behind us now, issues are trying good for the indexes
  • With one other pre-election yr on the horizon, may this be the yr when the indexes rally?

With the US presidential election on Tuesday, Nov. 5, 2024, we’re in a pre-election yr.

If we take a look at the , we see that the primary quarter of a pre-election yr has been constructive 17 out of 18 occasions since 1950, with the index rising by a mean of +7.4%. This was additionally one of the best quarter of the whole four-year presidential cycle. On high of that, the second quarter has been fairly good as properly.

The sample of the presidential cycle is usually like this: the primary two years of the presidential time period are the worst for the inventory market, as that is when the least widespread insurance policies are adopted, whereas however, the final two years of the time period are one of the best for the inventory market, as that is when the most well-liked insurance policies are adopted, just because elections are approaching and so they need to win votes.

Thus, the primary and second years are the worst for the inventory market, whereas the third and fourth are one of the best. Of all of the years, the third could be one of the best. Historical past tells us that the common efficiency of the S&P 500 since 1900 has been as follows:

  • First presidential yr: +6.82%.
  • Second presidential yr: +2.94%.
  • Third presidential yr: +11.84%.
  • Fourth presidential yr: +7.63%.

By the way in which, the biotech, industrial, and healthcare sectors are usually favored beneath the Democrats. Prescribed drugs and airways are likely to win when Republicans are elected.

Furthermore, the market did properly when capitol hill was divided. Though it did higher when managed by Democrats. However, these key components are nonetheless related for the S&P 500:

  1. It nonetheless cannot deal with the 200-day shifting common. It could not in March 2022, August 2022, December 2022, and now January 2023. On a few of these events, it began to beat the common a bit of however failed and rebounded decrease. So long as it stays above 3,783, there aren’t any issues, nevertheless it wants to interrupt the 200-day common to begin flying.
  2. If we plot the Fibonacci ranges right down to the related low (October 2022), we receive a collection of zones. These zones usually act as each upward targets and resistance. The primary zone was reached in November 2022. It was the primary upside goal and likewise acted as resistance. The second zone, or second medium-term upside goal, is at 4,150 factors.

Dow Jones

Just like the S&P 500, since 1900, the has carried out higher when Democrats are within the White Home.

Since Biden entered the White Home, the Dow Jones has set 44 new all-time highs and has gained +7%, putting him thirteenth among the many final 21 presidents. Since 1900, different presidents have seen a greater efficiency of the Dow Jones Industrial Common. The highest ten are as follows (besides Biden):

  1. Franklin Roosevelt (1933): +90.5%.
  2. Calvin Coolidge (1923): +51.7%.
  3. Barack Obama (2009): +48.7%.
  4. Warren Harding (1921): +39.3%.
  5. Richard Nixon (1963): +33.9%
  6. Gerald Ford (1974): +26.8%.
  7. Donald Trump (2017): +24.6%.
  8. Invoice Clinton (1993): +19.4%.
  9. George Bush (1989): +18.4%.

However there are two major points with the Dow Jones:

  1. Just like the S&P 500, it’s nonetheless unable to beat its resistance, which on this case shaped in August, and the index failed to beat it in November, December, and January. A break above 34,587 could be a constructive sign.
  2. A golden cross has been triggered. It was additionally triggered in mid-December, and there was a rally, however resistance is stopping a break in the intervening time.


NASDAQ Daily Chart

The yr that has simply ended noticed Apple (NASDAQ:), Amazon (NASDAQ:), Alphabet (NASDAQ:), and Microsoft (NASDAQ:) shedding floor for the primary time since 2008.

In 2022:

  • Apple: -26%.
  • Amazon: -50%.
  • Alphabet: -39%.
  • Microsoft: -28%.

In 2008:

  • Apple: -57%
  • Amazon: -45%
  • Alphabet: -56%
  • Microsoft: -44%

Within the 14 years between the 2 durations, there was no yr by which the shares of the 4 firms fell. There have been years when all 4 gained (2009, 2012, 2013, 2016, 2017, 2018, 2019, 2020, 2021).

Since 2000, the has carried out as follows:

  • 2000: -37%
  • 2001: -33%
  • 2002: -38%
  • 2003: +50%
  • 2004: +11%
  • 2005: +2%
  • 2006: +7%
  • 2007: +19%
  • 2008: -42%
  • 2009: +55%
  • 2010: +20%
  • 2011: +4%
  • 2012: +18%
  • 2013: +37%
  • 2014: +19%
  • 2015: +10%
  • 2016: +7%
  • 2017: +33%
  • 2018: +.04%
  • 2019: +39%
  • 2020: +49%
  • 2021: +27%
  • 2022: -32%

The S&P 500 is on monitor for its finest month since July, because of the semiconductor sector. Since its two-year low in mid-October, the has risen +30%.

Disclosure: The creator does not personal any of the securities talked about.

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