Political pundits have another five months to argue about which of the leading presidential candidates would be best for the U.S. economy. But politics aside, Hillary Clinton may be the best choice for stock investors in the near term for one simple reason: President Barack Obama. More specifically, the fact that Clinton and Obama are both members of the same party could provide a boost for the stock market if Clinton takes a commanding lead in the presidential race.
Historically, the old Wall Street adage “sell in May and go away” has not been a smart trade in U.S. presidential election years. In fact, since 1896, the Dow Jones Industrial Average has generated an average return of more than 4.0 percent from the beginning of May through the end of October in election years.
However, in election years in which the incumbent party wins, the market averages a stellar 7.4 percent return during that six-month stretch. During years in which the incumbent party eventually loses the election, the Dow has averaged a 1.1 percent loss from May to November.
Investors typically are wary of political unpredictability, and the election of the incumbent party is often perceived as a “more of the same” transition. A party transition, however, carries much more uncertainty.
Statistically speaking, these stock market returns are more than just coincidence. The correlation between the Dow’s May–October returns and the fate of the incumbent party in the general election is significant at a 95 percent confidence level.
In other words, if the Dow Jones Industrial Average finishes…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
