Election years have generated relatively modest returns for the DJIA
Since 1949, 81% of election years -- the fourth year in a presidential cycle -- have been positive for the
S&P 500 Index (SPX), as Schaeffer's Senior VP of Research Todd Salamone pointed out in the
latest installment of Monday Morning Outlook. The S&P has averaged a gain of 6.6% during this time frame, and soared 13.4% in 2012, the last election year. But what about the
Dow Jones Industrial Average (DJIA)?
As with the S&P, the
third year of a presidential cycle is hands-down the best. According to Schaeffer's Senior Quantitative Analyst Rocky White, the Dow has ended higher 94% of the time since 1949, averaging a gain of 15.8%, but is
on pace to break that streak in 2015.
In the fourth year of a presidential cycle, the blue-chip barometer has ended higher three out of four times. However, this year in the cycle has generated the slimmest returns, with an average of 4.8% and a median return of just 5.8%. This is also the only year when the average negative exceeds the average positive -- 13.3% to 10.8%, respectively.
Breaking it down even more, though, the greatest odds of a positive
second-half finish are in the last six months of an election year. Specifically, the Dow has been positive 81% of the time since 1949, compared to 63% of the time in the
first half of election years. The average second-half return is the slimmest, however, at just 2.7%.
Meanwhile, what can we expect on the 2016 volatility front?
Take those TV pundits with a grain of salt, Schaeffer's contributor Adam Warner recently warned.