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Pre-Presidential Performance



Yesterday, Toddo had a blurb about market performance in pre-Presidential election years. His missive piqued my interest, as seasonality can be a force to be reckoned with (ever try shorting before market holidays?). I took a look at monthly S&P 500 (cash index) performance in the year preceding an election, and the table below outlines the results. It does appear that there is some consistent weakness entering the Fall of a pre-election year, and November does seem to be a little weaker than a "normal" year. December has exhibited its usual excellent performance, however. This could be different from the tidbit Toddo mentioned for several reasons, the most likely of which is that the other source could have looked at more elections, or they could have used a different index for measurement.

These statistics are meant to simply give us some perspective at what has happened in the past. I view seasonality patterns the same as a gentle breeze when cycling - it's nice to have at your back, and it can help you outperform the next guy, but other factors are (usually) more critical. Also, we're only looking at 13 distinct occurrences here, so it's not like we can draw any statistically meaningful conclusions from this. Even though the table suggests January had a 100% chance of being a positive month, look at what happened this year. This type of information should be filed in the "nice to know, but not trade from" file.

In the table, "AVG" refers to the average gain or loss from the last day of the prior month to the last day of the month shown, "%POS" shows the percentage of time that month closed higher than the month before, "AVG GAIN" refers to the average return of those months that closed positively, and "AVG LOSS" shows the average return of those months that closed negatively.

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