The stock market is usually stronger for the first year after a Democratic president is sworn in.
This chart from the data provider Alpha Hat illustrates that how the benchmark S&P 500 Index has performed in the year after an inauguration since 1950. But as this election’s outcome has confirmed, the past is not always a reliable guide for what will happen next.
- Alpha Hat
The median S&P 500 performance for both parties one year after inauguration is 7.6%. It’s -7% for Republican presidents, and 14.7% for Democratic presidents.
The so-called Trump rally that took the major indexes to new highs after the election has paused. As DoubleLine Founder Jeff Gundlach said in December, the post-election excitement – this time for President-elect Donald Trump’s pro-business agenda – tends to fade into inauguration day and in the few weeks after.
The Dow has failed to hit the psychologically significant level of 20,000. Meanwhile, in one sign of the tight range stocks are stuck in, the S&P 500 on Thursday closed without a drop of 1% or more for the 68th day in a row. That’s the longest streak for such a narrow trading range in at least 10 years, noted Callie Bost, a financial analyst.
“Looking at all post-election years going back to 1950, February has been down 1.8% on average – making it the worst month of the year,” said Ryan Detrick, senior market strategist at LPL Research, in a note last week. “It might be the shortest month of the year, but be on the lookout for any banana peels this year.”
In the long run, however, the S&P 500 tends to go up regardless of who’s in office. It gained more than 200% during President Barack Obama’s time in office. On March 3, 2009, three days before the index bottomed after the financial crisis, he said “buying stocks is a potentially good deal if you’ve got a long-term perspective on it.”