$DJIA Voting For Obama: Election Year Winning Track Good For More Gains & Obama Re-Election Odds Better Than You Think – Jeffrey Hirsch MTS contributor
By Jeffrey A. Hirsch
Now that the post-convention polls are in it appears that President Obama garnered a bigger bounce than Republican challenger Mitt Romney. However, the stock market, namely the Dow Jones Industrial Average may already be voting for President Obama. As you can see in the chart below, 2012 is on the track of DJIA performances during years when incumbent parties won reelection. Since the stock market has done better in years when incumbent parties won, this is an indication that the year will likely hold on to the gains so far and potentially tack on more.
Click Chart to Enlarge…
A closer look at the last five election years when sitting presidents were running for reelection provides some deeper perspective. Since 1901 these 19 years have averaged gains of 9% with only two nasty losses greater than 5% in 1932 (Depression) and 1940 (WWII).
Ironically, the worst performing year of these last five election years when sitting presidents were running occurred during Reagan’s landslide reelection in 1984. 1984 was also the only losing year for the DJIA in the last nine that had a sitting president running. When Carter lost his reelection bid in 1980 the DJIA gained 14.9% on the year, but was down 9.5% at the April bear market bottom.
Click Chart to Enlarge…
DJIA barely dipped into negative territory for 2012 for three days in early June and is pushing through resistance and at new recovery highs. This action is prototypical for years when presidents achieve reelection. While we may suffer the usual end-of –September pullback, the market is poised to hold on to – and add to – the year’s gains.
Jeffrey A. Hirsch is Chief Market Strategist, Magnet Æ Fund, Editor-in-Chief of the Stock Trader’s Almanac, co-author of the Commodity Trader’s Almanac, editor of the Almanac Investor Newsletter, and author of Super Boom: Why the Dow Will Hit 38,820 and How You Can Profit From It and just-released The Little Book of Stock Market Cycles.
