Elections and the Stock Market – Winter 2006

Hello from Sycamore,

There has been a lot of speculation recently about the affect the recent elections may have on the stock market, so I thought I’d do a little reading to see what the numbers say.

The White House: I came across an article written by Jeremy Siegal Ph. D., that compared the stock market performance starting in 1948 while Republicans or Democrats controlled the White House. This comparison falls heavily in favor of Democrats. Under Republican presidents for this period, the market gained just over 9.5% per year while under Democratic presidents it gained more than 15% annually. The article did not identify which index was used as a measure, but I’m assuming a broad index similar to the S&P 500.

Now, to the recent mid-term elections where we saw a shift of power; So far, the most recent election seems to be having no significant effect (negative or positive) on the market. It’s continuing to roll along at a good clip. In the past we’ve seen similar results. An article by Dirk Hofschire posted on Fidelity’s investment website, states that for the one year period following the last five mid term elections, the Democrats are followed by slightly better stock market performance (24% to 20%). But what really struck me in this article, was the amount of the one year return immediately following these mid-term elections regardless of the winner. Large and small cap stocks since 1950, averaged 17.2% for the year immediatly following the election. For the years when the election of congress coincided with a presidential election, the return averaged 13.3%. When the congressional election was not a presidential election year, (such as just passed) stocks averaged 32.9% for the 12 months following the election….interesting!! Lets hope for average this year!

While this type of information can be entertaining and fuel for banter, I personally think that the Democratic vs Republican differences are merely coincidence. Additionally, it’s important for you to know that we do not use this type of information when investing your money. We stay focused on fundamental information, such as earnings and dividends. We pay no attention to the man behind the curtain!

As always, feel free to contact us with any question or request. Kokomo 765-455-1554 Anderson 765-643-9333.

Thanks for your business and trust,

Sycamore Financial Group


Past performance does not assure future results. Investors cannot invest directly in the stock market indexes such as the S&P 500. Invest return and principal value of an investment will fluctuate. Investor value, when sold, may be worth more or less than their original cost. The material in this presentation is for illustrative purposes and does not reflect any particular investment.