Russ Mould, investment director at investment platform AJ Bell comments:
“On average, the third-year of a presidential term produces the best returns from equities out of the four year cycle (see analysis below). However, US stocks bucked that trend in 2015 as they produced a lower return than any third year of a Presidential term over the past 67 years.
“With the fourth year of a presidential term generally producing the lowest returns, investors need to think carefully about their allocations to US equities.
“Besides political uncertainty, investors in US assets also need to think about lofty valuations, lofty margin debt and potentially lofty earnings expectations, especially after a near-seven-year bull run. However, the dollar could help boost returns in sterling terms, especially if the Fed does screw up its courage and raise interest rates as is looking increasingly likely.”
Dow Jones Industrials |
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Election |
President |
Party |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
|
|
|||||
1948 |
Harry S. Truman |
Democrat |
12.9% |
17.5% |
14.5% |
8.4% |
1952 |
Dwight D. Eisenhower |
Republican |
-3.8% |
44.0% |
20.8% |
2.3% |
1956 |
Dwight D. Eisenhower |
Republican |
-12.8% |
34.0% |
16.4% |
-9.3% |
1960 |
John F. Kennedy * |
Democrat |
18.7% |
-10.8% |
17.0% |
14.6% |
1964 |
Lyndon B. Johnson |
Democrat |
10.9% |
-18.9% |
15.2% |
4.3% |
1968 |
Richard M. Nixon |
Republican |
-15.2% |
4.8% |
6.1% |
14.6% |
1972 |
Richard M. Nixon ** |
Republican |
-16.6% |
-27.6% |
38.3% |
17.9% |
1976 |
Jimmy Carter |
Democrat |
-17.3% |
-3.1% |
4.2% |
14.9% |
1980 |
Ronald Reagan |
Republican |
-9.2% |
19.6% |
20.3% |
-3.7% |
1984 |
Ronald Reagan |
Republican |
27.7% |
22.6% |
2.3% |
11.8% |
1988 |
George H. W. Bush |
Republican |
27.0% |
-4.3% |
20.3% |
4.2% |
1992 |
Bill Clinton |
Democrat |
13.7% |
2.1% |
33.5% |
26.0% |
1996 |
Bill Clinton |
Democrat |
22.6% |
16.1% |
25.2% |
-6.2% |
2000 |
George W. Bush |
Republican |
-7.1% |
-16.8% |
25.3% |
3.1% |
2004 |
George W. Bush |
Republican |
-0.6% |
16.3% |
6.4% |
-33.1% |
2008 |
Barack Obama |
Democrat |
17.5% |
11.0% |
5.5% |
7.3% |
2012 |
Barack Obama *** |
Democrat |
26.5% |
7.5% |
0.2% |
|
|
|
|||||
Average |
5.6% |
6.7% |
16.0% |
4.8% |
||
Source: Thomson Reuters Datastream, AJ Bell Research
* John F. Kennedy assassinated in November 1963 and replaced by Lyndon B. Johnson
** Richard M. Nixon resigned August 1974 and replaced by Gerald R. Ford
*** 2015 performance data run to 5 November.
Past performance is not a guide to future performance and some investments need to be held for the long term.