Next year should be a great year for the stock market.
In my review of 70 years of Presidential election returns and the stock market performance of the S&P 500 Index, there seems to be a consistent trend that in an election year where a democrat wins, the inaugural year (2017) is better than the election year (2016) by double-digit percentages.
By contrast, in an election year when we elect a Republican President, the election year (2016) is better than the inaugural year (2017) by double-digit percentages. In the 1992 election year, for example, the S&P 500 Index jumped by 7.62%, but in the inaugural year 1993, after Bill Clinton's victory over Geoge H. W. Bush, the S&P 500 Index was up 10.08% and the Dow was up 13.7%. In the election year of 2008, the market was down -37%, but in the inaugural year of 2009 after Obama succeeded Bush, the stock market was up 26.5%.
This trend has been true with only rare exceptions since the end of World War II in election and post-election years.
The only negative year for democrats was Jimmy Carter's inaugural year. All of the others have averaged almost 20% gains.
Needless to say, this is a unique election, largely because of Donald Trump's historically unique campaign style. That could certainly provide for one of the rare exceptions. At the moment, however, the polls seem to indicate that it is unlikely that Trump will win.
Even if he does win, however, 2017 may still be a strong year. Many analysts believe that Wall Street will perceive Trump as if he were a Democrat. In general, Trump has almost no support from Wall Street or wealthy establishment Republicans. Almost all of his fundraising has come from very small donors and from himself.
Both he and Hillary Clinton have espoused views that are perceived as anti-free markets and not very pro-business.
In addition, polls seem to indicate that Republicans will almost certainly maintain control of the House and probably keep a slim majority in the Senate.
Analyst believe that because of this divided government, stock markets should react "positively" in 2017, since neither Clinton or Trump will be able to implement any of their anti-business, anti-free market policies that so many voters fear.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Paul Dietrich is the CEO and Chief Investment Officer of Fairfax Global Markets LLC. Fairfax Global Markets LLC is an investment advisor registered with the SEC. For a detailed about its investment advisory activities visit www.adviserinfo.sec.gov. The opinions and portfolio information provided are for illustrative purposes and are subject to change at any time and are not to be construed as advice for any individual or as an offer or solicitation of an offer for purchase or sale of any security. Certain securities mentioned in this report may be held in client portfolios and by Paul Dietrich individually.