Market Insight

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May Market Insight

History demonstrates markets may react to election results for a very short period of time, reverting back to its primary trend almost immediately thereafter. After examining equity market performance from mid-May to election day over the past six Presidential elections dating back to 2000, the S&P 500 rose five out of six times with an average gain of over 7%. The notable exception was in 2008, when the market was already in midst of the Global Financial Crisis. Furthermore, four out of six of those years ended positive by year-end, with the only additional exception being the year 2000 when investors were beginning to feel the fuller effects of the dot-com bubble.

When one examines the next full calendar year after an election, five of the six years turned in positive performance, averaging a 22% gain. The only negative year was 2001 when the high-tech industry was still suffering from excessive valuations and little earnings growth. It is our contention institutional analysts and investors tend to evaluate the true data propelling economic function which simply cannot be altered in the few months immediately preceding or following an election no matter its importance and potential impact. Campaign promises and action supporting political changes take time to implement. The factors and variables which lead to change are often elusive and not as predictable as one may think.

We have no reason to believe recent market history will not repeat itself again during this campaign cycle and the general economic conditions will once again prevail as the major factor being considered by investors come election time. We remain focused on quality employment figures and continued progress bringing inflation to even lower levels.

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This information is not legal or tax advice and past performance is no guarantee of future performance.