Historical US Election Analysis

Historical US Election Analysis

There are a mess of polls and opinions about the US election flooding media at present, and, driven by political persuasion and one's desire to sell advertising, the views are as bent as can be. But as investors and traders we know that there's one thing that never lies - THE MARKET! As such, we've let it do the talking with some historical analysis - we hope you find it useful.

While still improbable, Donald Trump’s chances of winning the US presidential election have almost tripled since bottoming on October 17, as the response to his vulgar comments were at their peak. In the weeks gone by since then, the race for the White House has tightened and Trumps chances have risen from 11.9% to be presently 34.3%, according to poll aggregator fivethirtyeight.com. Betting agencies have the chances of Clinton winning about two-to-three times higher than that of Trump winning, but in a year that gave us the Brexit result, investors and pundits are naturally a little skeptical about the intelligence of odds-makers.

Rivkin takes a long-term view when putting together the investment theses that form our investment strategies, and therefore this particular event doesn’t really feature to heavily in our practical investment approach. Nonetheless, we have the skills, access to data and analytical systems required to pitch in and help out when curiosity demands it, and as such we’ve put together a practical view of market moves following two election year periods.

First, we looked at how the Dow Jones Industrial Average performed in the weeks that followed the last 10 elections. We chose the period from 1 November until the time of the President Elect’s inauguration (20 January the following year) for the election years between 1976 to 2012, and here are the results:

You can see that in the 80 days so from the Election Day until the Inauguration Day, there have been two significant moves in the last 10 elections, with the worst result (-14.71%) falling in the midst of the Global Financial Crisis in 2008.

Second, we looked at the 100 days from the Inauguration Day, being the period where the new President is trying their best to dominate and leverage their election mandate to deliver pre-election promises. We found that, during this period, results were actually quite positive in general. In fact, when you add the two 2008 results together (the chart below is referencing the year that follows the election date), you’ll find that even the post GFC period came close to cancelling itself out.

The big disclaimer here is that past performance is not a reliable indicator of future performance, and therefore the analysis above should not be used to provide solid guidance as to what is in store for the next few months of trading. Rather, it offers greater perspective than what is presently being offered in the press or by analysts attempting to grab headlines with extreme views.

Lastly, with regard to the timeline for market-watchers in Australia, this is how the election will unfold:

  1. 6am-7pm US Eastern Time Tuesday (9pm Tuesday to 10am Wednesday, Australian Eastern Standard Time) is when the majority of polling, exit polls and projection coverage will conducted and monitored
  2. 11pm US Eastern Time Tuesday (2pm Wednesday, Australian Eastern Standard Time) is the earliest possible time that a concrete result will be called
  3. The winner spends until 20 January 2017 as President-elect, during which time President Obama (who, practically speaking, will be in caretaker mode) remains in his current job
  4. From 20 January onward the new President will attempt to implement his or her ‘first 100 days’ pre-election promises

We hope you find this helpful, and you're as welcome as always to contribute with your own views in our discussion section below.

* This article is provided by Rivkin Securities Pty Ltd (AFSL 332802) and contains general advice only. It does not take into account your, or anybody else’s, investment objectives, financial situations or needs. Past performance is not a reliable indicator of future performance.

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