How Will the Election Affect the Stock Market?

According to popular trading rules, we are approaching a positive period of seasonality.

You might have heard the term "Sell-In-May-and-Go-Away" – the other side of that is often called the "Halloween Indicator".  Research published by Yale Hirsch in the Trader's Almanac shows that the market year is often broken into two six-month seasonality periods.

  • From May 1 through October 31 seasonality is unfavorable, and the market most often finishes lower than it was at the beginning of the period.
  • The period from November 1 through April 30 is seasonally favorable, and the market most often finishes the period higher. 


While the statistical average results for these two periods are quite compelling, trying to ride the market in real-time in hopes of capturing these results is not always as easy as it sounds.

Now, combine that with the election.

On both sides you have people who don't know what they're talking about.

And on both sides you have  news sources saying that if the other party gets elected, our country will collapse.

I talked with Jeff Hirsch from the Stock Trader's Almanac to get his opinion on how this election will affect the stock market.


Historically speaking, The Dow goes up regardless who gets elected, but the data isn't particularly strong either way. Election results don't actually predict the stock market that well. The converse isn't true.

Can the stock market reliably predict who gets elected?  According to Kiplinger, if the stock market is up the three months prior to the election, the incumbent party wins. Based on 22 elections, with 14 having gains in the prior months, 12 elections saw the incumbent party win.

So, what's your bet?  Will this year be an exception to the rule?


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