Fisher Investments on the Market Impact of the Upcoming Presidential Election
Research from Fisher Investments illustrates the impact of election years on market returns
Aug. 30, 2011 - PRLog -- US presidential terms have a powerful pattern that many investors miss. Examining the S&P 500’s average return in each year of a president’s term from 1926 to 2010 reveals interesting results. In the first year, the index historically averages a return of 8.1%, in the second year 8.9%, in the third year 19.4% and in the fourth 10.9%. Fisher Investments refers to this phenomenon as the Presidential Term Anomaly.
Fisher Investments released an infographic summarizing market trends in presidential election years, which can be accessed here: http://www.marketminder.com/
2012 will be an election year—year four—historically a good year for stocks. Why are returns higher in the years three and four? Legislative risk aversion is typically much lower in the second half of a President’s term. Presidents typically lose relative power at mid-term elections. They know this, and push for more major legislation in the front half when their power is likely to be greater. New legislation typically results in redistribution of money, property rights or regulatory changes. Fisher Investments research shows people hate losses much more than they like gains, so when the likelihood of legislation is higher, overall risk aversion rises—muting returns.
Another factor to consider in 2012 is whether we re-elect a Democrat or newly elect a Republican. History shows either is particularly a sweet spot for stocks—averaging 14.5% when a Democrat is re-elected and 18.8% when a Republican is newly elected.
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About Fisher Investments
Founded in 1979, Fisher Investments is an independent, privately-owned money management firm with more than $44 billion (as of 6/30/11) under management. Fisher Investments maintains two principal business units, Fisher Investments Institutional Group and Fisher Investments Private Client Group, which serve a global client base of diverse investors. Fisher Investments’