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This is Still an Election Year

We have all been rather preoccupied with the coronavirus pandemic, market volatility and our individual situation. Meanwhile there is still a U.S. Presidential Election taking place this year, notes Jeff Hirsch, editor, Almanac Investor. And folks are beginning to wonder what the next political alignment might be and the ramifications that alignment had on the market historically.

Six possible alignments exist in Washington: Republican President with a Republican Congress, Democratic Congress or split Congress; and a Democratic President with a Democratic Congress, Republican Congress or split Congress. Data presented in the chart below begin in 1949 with the first full presidential term following WWII.

Election years are traditionally up years. Incumbent administrations shamelessly attempt to massage the economy so voters will keep them in power. But sometimes overpowering events occur and the market crumbles, usually resulting in an change of political control.

Republicans won in 1920 (DJIA -32.9%) as the post-war economy contracted and President Wilson ailed. The Democrats came back during the 1932 (-23.1%) Depression when the Dow hit its lowest level of the 20th century. A world at war and the fall of France jolted the market in 1940 (-12.7%), but Roosevelt won an unprecedented third term. Cold war confrontations and Truman’s historic upset of Dewey held markets down through the end of 1948 (-2.1%). Recently the Great Recession and bear market of 2008 (-33.8%) helped put Obama and the Democrats back into the White House.

Editor’s Note: Sign up today for a FREE 7-Day Trial to Almanac Investor to get a full run down of seasonal tendencies that occur throughout each month of the year in an easy-to-read calendar graphic with important economic release dates highlighted, Daily Market Probability Index bullish and bearish days, market trends around options expiration and holidays. In addition, the Monthly Vital Statistics Table combines stats for the Dow, S&P 500, Nasdaq, Russell 1000 and Russell 2000 and puts them all in a single location available at the click of a mouse.

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