In 1977, the modern American electoral system was inaugurated and has remained unchanged ever since. Every January 20th every 4 years, a new president is inaugurated and remains in office until the next president is inaugurated. This has been the schedule ever since and on January 20th, 2025, 48 years later, the next President of the United States will be inaugurated.
As the US elections approach, there are many comments or predictions about the behavior of the stock market, interest rates, etc. “Last year, they won’t let the stock market fall”, “the president will force rates down”, etc. However, we have seen few numbers and rigorous studies.
So let’s analyze with data how these have gone. 11 election periods. Knowing that even if mathematics does not lie, it is impossible to anticipate the future.
Let’s get to the data. On January 20, 1977, the index of the 500 largest American companies, the S&P 500, was in 102.97 points and on January 20, 2021 it was in 3,851 pointswhich represents an average performance of each electoral period of the 39.8% excluding dividends.
We currently have the S&P 500 in 5,600 pointswhich would mean that in the current electoral period he has a result of 45%, slightly above the average. If we analyze the evolution of the average performances of these 11 four-year electoral periods, between 1977 and 2021, we have the following graph.
We indicate in green the best performing moment, coincidentally it occurs far from the electoral moments, precisely between the elections.
And in red a correction that occurs before the elections. If we remember a little, elections do not suit the market. How many times in Europe have we been worried about the outcome of elections, We will be able to govern in France, the extreme right rises in such a place, we will have Brexit in the United Kingdometc.
SO, It is not surprising that we are going through a period of pre-election nervousness and even more so when listening to the speeches of the two candidates. If we expand the last three months, we observe that if we pay attention to the seasonal period, The best time to invest in the S&P500 would be November 20th.
With this, we do not intend to guess the future, but investing with a seasonal criterion helps us to be more correct than investing without any time criterion.
