As we are full of turkey and dressing we not only have to digest our Thanksgiving Day dinner, but also the fact that the Dow Jones Industrial Average broke above the 30000 for the first time. The 454 point gain last Tuesday came as President Trump announced his administration would cooperate with Presidential-elect Joe Biden’s transition to the White House.
My how things have changed over the last four weeks. When we arrived at the beginning of November, much of the investment community had heightened concerns about the prospects for continued domestic equity growth during what was assumed to be a volatile market environment with the potential for a contested U.S. presidential election. This has largely proven not to be the case, however, as the core domestic equity market, represented by the S&P 500 Index, has posted a gain of 8.79% since the end of October.
While the magnitude of these gains would have been difficult for anyone to predict, we do see that most U.S. presidential election cycles generally produce positive returns for domestic equity indices in the two months after the election, regardless of which party wins. This is not the case every year, as some market environments remain immune to historical tendencies due to extraordinary events, such as those recently seen in 2000 and 2008. Nonetheless, the bias toward positive average equity returns following U.S. presidential elections remains intact. Markets generally do not like uncertainty, and so it is not necessarily surprising that we typically see domestic equity improvement when most of the country understands the political direction of the U.S. for the next four years.
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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.
Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Securities offered through Triad Advisors, member FINRA/SIPC. Imvestment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors.