Election-Year Market Boom: US equities won’t be winners this time around

Posted January 8, 2008

"Perhaps the single biggest domestic achievement that President Bush can point to is the reduction in the Federal deficit to just 1.2% of GDP in fiscal 2007. However, in the wake of recent Congressional elections the president has been cast adrift by a legislature that is not now dominated by his own Party." — Jeremy Batstone-Carr

by Jeremy Batstone-Carr

Blogger's Note: We found this article on the site of our British friends and colleagues at MoneyWeek. Good stuff, if we say so ourselves…

Baltimore — (TFN): Historically, US presidential election years have been good for the US equity market. According to Capital Economics, since 1897 the Dow Jones Industrial Average has risen by an average of 9.1% against an average increase of 7.2% in non-election years. Similarly, the S&P 500 has increased by an average of 9.3% in election years, against 6.5% in non-election years. Note, however, that these are averages and thus smooth out what can be pretty large fluctuations in index performance over time.

That said, looking at the nine election years from 1970 reveals a very similar picture; the Dow Jones rising by 8.2% during election years and the S&P 500 by 10.8%. The most obvious explanation for this relatively strong showing is that election years have tended to be good years for the US economy.

This does not look like being the case in 2008.

Click here to read on and find out why.

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