A Pattern in Stock Market Returns During Presidential Election Years?

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October 31, 2012  

 

Have you wondered if there is a pattern in stock market returns during presidential election years?  Many pundits like to make predictions of stock market performance around presidential elections. 

 

Complex factors

Predictions are a tricky exercise.  In addition to the presidential election, there is uncertainty about possible changes to income taxes, capital gains taxes, and estate taxes in 2013.  Add to these, issues concerning the national debt, economic indicators, earnings reports, and a host of other news, and you have a very complex picture. 

 

All have a potential effect on market performance.  Estimating how they may interact with one another is an undeniably complex equation.

 

No pattern to election year returns

 

A recent examination of election year returns found no consistent pattern in these returns. During the current presidential term, the stock market’s1 annualized return has been over 15% since the start of 2009.

 

What’s Next?

 

As we approach Election Day, it is good to remember that we cannot control stock market returns or elections.  However, we can focus on those factors that are within our control – costs, diversification, portfolio structure, and tax efficiency.

 

 

1 as measured by the S&P 500 Index.  Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio.

 

Performance data shown represents past performance.  Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown.