Tuesday, August 16, 2016

The Election Indicator

Right now as a side effect of the elections you'll hear about the Election Year Indicator.  It's part of a group of indicators people have come up with over the years to correlate with the market. While this is one is likely the most famous let's not forget about the Super Bowl Indicator, Lipstick Indicator, Women's
Hemline Indicator, and Triple Crown Indicator.  They have varying degrees of success  I don't pay any attention to them, and it's up to you if you'd like.


In fact, over the last 60 years, the average gain in the Standard & Poor's 500 Index during election years is a plump 6.6 percent, said James Stack of InvesTech Research, an investment newsletter. However, it should be noted that this average return comes with extreme volatility.

Judging by this year's start I'd concur.  How about you Doctor Harris?*

The performance of the S&P 500 Index in the three months before a presidential election has successfully predicted the winning political party 86.4 percent of the time, according to InvesTech Research. When the stock market moves higher, the incumbent party usually wins. That has been the case in 12 of the 14 elections since 1928.


That's actually a really good track record.  


When the stock market moves higher, the incumbent party usually wins. That has been the case in 12 of the 14 elections since 1928.

Conversely, in the eight elections since 1928 when the S&P moved lower, the incumbent party lost seven times. The stock market has correctly predicted the winning party 19 out of 22 elections, Stack said.


Possibly above my pay grade, but seems the economy is the determining factor here. What was that famous quote again? 

*Can you recognize what movie that's from?

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