The stock market has been a better predictor of presidential election winners than polls. According to Strategas Research Partners, the incumbent party has won if stocks are higher in the three months leading into the election, and vice versa. This simple rule has worked in twenty of the past 24 election cycles. Using the period starting July 10 and ending October 10, the S&P 500 Index has returned +3.85% (source: Bloomberg).
While presidential elections are undoubtedly important in determining the nation’s overall direction, congressional elections play a crucial role in shaping policy, providing checks and balances, and influencing the political landscape. The chart below shows the average annual return of the US stock market under different Federal government arrangements.
Source: Strategas, S&P. Data excludes 2001-02 due to Sen Jeffords changing party mid-2001.
We believe the market likes gridlock (mixed Congress) more than a blue or red sweep. A divided government typically results in legislative gridlock, more checks and balances, and a more predictable policy environment.
DISCLOSURE:
Past performance has no guarantee of future results. Personnel of RiskBridge Advisors, LLC (“RiskBridge”) prepared the Risk Report. The views expressed herein do not constitute research, investment advice, or trade recommendations. RiskBridge may, from time to time, participate or invest in transactions with issuers of securities that participate in the markets referred to herein, perform services for or solicit business from such issuers, and/or have a position or effect transactions in the securities or derivatives thereof.
All references to index funds and other economic indicators are provided for illustrative purposes only. Investors cannot invest in an index, and indexes do not reflect the deduction of advisor’s fees or other trading expenses.
Information about benchmark indices is provided to allow you to compare them to the performance of RiskBridge portfolios. Investors often use these well-known and widely recognized indices as one way to gauge the investment performance of an investment manager’s strategy compared to investment sectors that correspond to the strategy. However, RiskBridge’s investment strategies are actively managed and not intended to replicate the performance of the indices: the performance and volatility of RiskBridge’s investment strategies may differ materially from the performance and volatility of their benchmark indices, and their holdings will differ significantly from the securities that comprise the indices. You cannot invest directly in indices which do not take into account trading commissions and costs. Net total return indices reinvest dividends after the deduction of withholding taxes, using (for international indices) a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.
S&P 500® Index is a market capitalization-weighted index of 500 of the largest U.S. companies, designed to measure broad U.S. equity performance.
This Risk Report is distributed for informational purposes only. All material presented is compiled from sources believed to be reliable, but accuracy cannot be guaranteed, and RiskBridge makes no representation as to its accuracy or completeness. Any opinions, recommendations, and assumptions included in this material are based upon current market conditions, reflect the judgment of RiskBridge as of the date indicated, and are subject to change without notice. You acknowledge and agree that RiskBridge is not obligated to provide any additional information or update such information in making the information available. Securities and/or indices highlighted or discussed in this communication are mentioned for illustrative purposes only and should not be construed as investment recommendations. All investments involve risk, including the loss of principal. Before implementing any strategy, consult with a qualified financial adviser and/or tax professional. Risk Report and this information are not intended to provide investment, tax, or legal advice, and this material is not to be relied upon in substitution for the exercise of independent judgment. This Risk Report is not to be reproduced, in whole or part, without the written consent of RiskBridge.