Historical Perspective- Election Edition

The election is now behind us.

As we look forward it could be argued that there may be more uncertainty than clarity regarding president elect Trumps overall effects on the economy and markets .

Here are a few interesting statistics to provide some "macro" (ie high level) insights on what has happened historically in an election year:

The S&P 500 Index has mostly risen in presidential election years  (source: BTN Research)

In fact, 16 of the past 18 presidential election years have produced a positive return for the S&P 500 Index. The only down election years for the S&P500 dating back to 1944 have been 2000(dot-com) and 2008 (housing collapse) .

Along with the fiscal policy, interest rates have a major effect on stock and bond market prices. in the past 50 years Federal Reserve has either cut or raised short term rates  in EVERY presidential election year except for the last one in 2012.  Whether is will happen in 2016 is to be determined, with only one meeting left in 2016 and consensus split on potential rate hike.

One final thought is the return statistics for the stock market in the  first year of a new president.

Since 1931 the average return of the S&P 500 in the first year of a presidential term (new or incumbent) is 7.9%.

During Obama's first term first year (2009) the return was 26.5%, second term, first year (2013) was 32.4%.

2017 will certainly be interesting that may bring a lot of change but based on historical precedence, their is reason to be optimistic.