I’ve had several people ask me recently about presidential elections and their effect on the markets. Great question! Let’s take a look…
There is a tremendous amount of information from academic sources on the subject, and after having looked at the data I have some insight I would like to share.
I asked questions such as:
Do presidential elections make the markets go up? Down?
Is it better if a Republican is elected, as opposed to a Democratic administration?
Do markets generally go up or down before an election?
Do markets generally go up or down right after an election?
Going all the way back to George Washington, the trend is remarkably clear. In fact, presidential elections have had the same effect on the markets for hundreds of years.
So, in the end, what is the answer? What kind of effect does an election year have on your investments?
Literally. There is no correlation between presidential elections and the stock market. Absolutely none. There might be some elevated volatility, but from a long-term perspective, no one can find any positive or negative connection between presidential elections and the stock market.
Which takes me back to the mantra I want all of you to repeat, “Nobody knows when the markets are going to go up or down, but long-term they have always gone up.”
By the way, the Dow Jones Industrial Average in January of 1885 was 30 points. Yesterday the Dow Jones closed at 18,553 points.
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