11/23/2011 9:10 AM ET|
2012 could be a good market year
Stocks typically perform well in years when the White House incumbent is seeking another term. Often, the market's direction even predicts an election's outcome.
Greece is burning, Italy's imploding, and the U.S. economy is limping along in a recovery so weak it's barely stronger than a recession. And investors are reeling.
But next year may turn out to be pretty good for stocks.
How can I say that? Because from here on, the market's historic calendar is in investors' favor.
And if we can stay out of recession in the United States and avoid one in the developing world, earnings of U.S. companies may hold up well enough to support somewhat higher stock prices. (A recession in Europe is already baked into the cake.)
Most of all, 2012 is a presidential election year; since 1948, markets have gained in every presidential election year except 2000 and 2008. In fact, stocks have, on average, put in their second-best performance in the fourth year of a president's term. (The third year has been best.)
And during years in which incumbent presidents run for re-election, the market has beaten its average election-year performance significantly.
It doesn't matter if the incumbent wins or loses (though no investor can know that in advance) or how good or bad a president he was. The market has just done better in "incumbent" election years than in "up for grabs" elections, like Bush vs. Gore in 2000 or McCain vs. Obama in 2008.
The data are remarkably consistent.
The Standard & Poor's 500 Index ($INX) posted average returns (not including dividends) of 5.7% during all presidential election years from 1944 to 2008, according to S&P chief equity strategist Sam Stovall.
The Stock Trader's Almanac, using the Dow Jones Industrial Average ($INDU) and earlier proxies, calculated nearly identical presidential election-year returns, 5.8%, from 1832 to 2008. (The Dow itself averaged 7.4% annually in election years from 1900 to 2008, according to the Almanac's figures.)
And I looked separately at years in which an incumbent president was running for re-election. It didn't matter if the president was running after a full elected term, like Ronald Reagan, or took office after the death or resignation of the previous incumbent, like Lyndon Johnson or Gerald Ford.
The results? In the 14 election years since 1928 that included an incumbent president, the S&P 500 rose an average of 14.6%. In all the incumbent election years since 1900, the Dow gained on average 9% -- substantially besting the averages' performance during all election years.
When he heard these results, Stovall said, "People feel more comfortable that at least you know how to drive the bus. You're not facing (one of) two people taking over who lack total experience."
In other words, one devil you know is better than two you don't.
Stovall, incidentally, is pretty bullish on the market for the rest of this year as well as next year. He wrote that the S&P "barely escaped" a bear market when it closed at 1,099.23 on Oct. 3 and then bounced back strongly, "suggesting the bull market is still alive."
Research he's done on the four severe corrections (15% to 20% declines) and the four mini-bear markets (20% to 25% sell-offs) since 1945 indicates that "the S&P 500 gained an average 23% in the six months after these eight market bottoms . . . (and) was higher by an average of 31.7% a full year after these market declines had run their course."
So it's not surprising that S&P's Investment Policy Committee recently raised its 12-month target for the S&P to 1,360 from 1,260.
VIDEO ON MSN MONEY
You say 2012 might be a good year for stocks.
Here is my opinion;
2012 might be a good year,
however 2012 might not be a good year,
but on the other hand it might be a pretty good year,
however it might just be a mederoker year,
but it could be a very good year,
however it might be a very bad year,
but perhaps a good year the first half,
and a bad year the second half,
however, maybe just a fair year,
but it could be a real good year,
then again maybe not a very good year.
I just thought you would like to know my opinion. I am kinda an expert on advice.
The United States is heading off a cliff and we have Congress to thank; Congress no longer serves the People it serves Wall Street Bankers [. . ..]
It seems more appropriate to "blame" (to make a moral play of causality) the overall course of America, its citizens, its military-industrial complex, and its elected officials.
We shopped till we dropped, lived on borrowed money and borrowed time, paid no heed to the danger of a polity run by and for an empire-building machine, and voted so seldom that the winners in offices and issues was usually the result from fewer than half of eligible voters casting a ballot. We didn't complain when referred to as "The Consumer."
We got fat.
We forgot that what keeps a free people free is not found at the mall.
Here's my best guess. 2012 will be so-so for the market, poor for Main St, terrible for the unemployed and average guy and gal.
America has no process for reshaping Washington and the political ruling class will remain at the top and in charge, operating as usual for their own personal interests. 2012 will continue to be good for the political class, especially the Washington class.
[. . .] since 1948, markets have gained in every presidential election year except 2000 and 2008
Or, put another way, markets used to gain in a presidential election year, but they don't anymore.
And I guess I'm missing something,from all the history and charts I have known, this and next year are supposed to have been banter years, 3rd.&4th. year of "any" sitting presidents term.
Although we are still in recession this year, it should have been better.
Sorry, but I'm really not buying any of this sh!dt, UNLESS our Congress get's their head out of their collective azzes.
And Europe is not the only excuse or even a good one.
......and...............2013 could be a good year............2014 could be too.................or.........not....
Gee, this is easy...............
This article is one big joke...
Every year is great for stock manipulators.
Seems that what happens in Europe will have a bigger effect on our market than a presidential election next year. Obama has done nothing but make the market more volatile so you add the mess in Europe to the mix and it is even more volatile.
hmmm... 2012 a good year for the market?
Is Obama resigning?
Did Congress balance the budget and being paying down Obama's 5+ trillion in new debt?
Did Europe stop borrowing to support it's socialist programs?
Did the FED stop printing massive amounts of new dollars?
Somehow, I am not optimistic...
You hit the nail on the head brother. The jerks that write this stuff have absoutely no idea what will happen. Their "advice" changes with the wind. When you finish reading it, you realize they have covered all CYA bases. Then when you try to think about what they just said, it's like analyzing an Obama "hope and change" speech; it sounds so good, but he doesn't say a damn thing.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] S&P futures vs fair value: -5.50. Nasdaq futures vs fair value: -20.30. The stock market is on track for a modestly lower open with futures on the S&P 500 trading six points below fair value. Nasdaq futures, meanwhile, underperform (-20 pts v fair value) due to noteworthy pre-market weakness in the shares of Amazon.com (AMZN 317.98, -40.63) after the online retail giant missed bottom-line estimates and forecast a wider than expected operating loss for Q3. ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'