With 2016 being an election year, the new edition of the STOCK TRADER’S ALMANAC 2016 (Wiley; October 2015; 978-1-119-11068-2; $50; Spiral-bound paperback and E-book) includes all the market charts of elections since the Depression, the last nine sixth years of decades and never-before-shown Eighth Year of Presidential Terms charts.
“Election years are the second-best year of the four-year cycle and sixth years of decades have been up double digits four in a row, so 2016 has some solid history behind it,” says Hirsch. “Eighth years of presidential terms represent the worst of election years since 1920. In eighth years, the DJIA has suffered an average decline of –13.9%. As a result, eighth years have vastly differed from the typical election-year pattern.”
Hirsch adds, “Bull markets tend to occur in the third and fourth years of presidential terms while markets tend to decline in the first and second years. The ‘making of presidents’ is accompanied by an unsubtle manipulation of the economy. Incumbent administrations are duty-bound to retain the reins of power. Subsequently, the ‘piper must be paid,’ producing what we have coined the ‘Post- Presidential Year Syndrome.’ Most big, bad bear markets began in such years. Our major wars also began in years following elections. Post-election 2001 combined with 2002 for the worst back-to-back years since 1973–1974. Plus, we had 9/11, the war on terror, and the build-up to confrontation with Iraq.”
As for 2015, tepid economic data leading to so-so earnings forecasts and a Fed that is considering when to raise rates for the first time since 2006, has likely led to this lack of market performance this year versus past pre-election years.
“A lame duck Democratic president remains at odds with a Republican Congress. With little left to juice the economy an incumbent-less, wide-open, and contentious race is bound to weigh negatively on the market,” Hirsch says.
The data and analyses in the Almanac are relied upon by savvy professionals, from well-known money managers to journalists. Allowing shrewd investors to maximize profit potential, STAis the ultimate desktop market data bank, showing the market’s likely direction every hour, day, week, and month based on historical precedent. STAtransforms investing into a business framework and makes investing easier by presenting new techniques and tools, providing pertinent statistics on past market performance, and supplying forms necessary for portfolio management.
Now in its 49th annual edition, the guide’s original look is back, with a lexotone cover with an attractive spiral and gold foil stamping that provides a more-user friendly format that lies flat when open, making it easier to write notes, lighter and more portable. This is the third year with the new design that harkens back to the original format that Yale Hirsch pioneered over 40 years ago, proving that everything old is new again.
This must-have investment tool has a wealth of information organized in a calendar format. It alerts readers to little-known market patterns and tendencies that help investors forecast market trends with accuracy and confidence.
Created by Jeff Hirsch and the Hirsch Organization, tools and strategies contained in STA include:
The January Barometer: Predicts that stock market performance during the month of January sets the direction for the entire year. In fact, every down January for the S&P 500 since 1950 has been followed by a new or continuing bear market, a 10% correction or a flat year. January’s first five days are also an early warning system. The last 41 up First Five Days were followed by full-year gains 35 times for an 85.4% accuracy ration and 14.0% average gain in all 41 years. In presidential election years this indicator has a solid record. In the last 16 presidential election years, 14 full years followed the direction of the First Five Days. The full-month January Barometer’s record is not quite as good in election year as 12 of the last 16 full election years have followed January’s direction.
The Best Six Months Switching Strategy AKA Sell In May: The stock market tends to make almost all of its gains during just six particular months of the year. In most years, the rest of the time traders would be better off putting their money in T-bills and going fishing. STA has upped the ante on this old favorite by combining the benefits of the Best Six Months with a technical timing indicator and the four-year cycle, nearly tripling the Best Six Months results with four trades every four years. The Almanac provides detailed instructions on how to implement trading strategies based on the Best Months Switching Strategies and some simple techniques for determining what to trade when implementing this strategy, including a sampling of tradable mutual funds and ETFs.
Four-Year Presidential Election/Stock Market Cycle: Our presidential elections every four years affect the economy and the stock market – just as the moon affects the tides. Electing a president every four years has set in motion a 4-year political stock market. Presidential election years are the second best performing year of the four-year cycle, producing loss of greater than 5% in only six of those 30 years. Incumbent parties lost power in five of those years. Eighth years of presidential terms represent the worst of election years since 1920.
In addition to access to the annual STA print edition, a subscription to the digital product ALMANAC INVESTORprovides twice weekly e-mail alerts that feature stock market forecasting, indicators, and seasonal patterns, alerting users to the best/worst trading days, market changes, stock and ETF recommendations and updates, financial commentary, overall market sentiment; monthly enewsletters that provide a guide to market patterns, cycles, fundamental developments, strategies and stock selection, and updates and expands the strategies outlined in theStock Trader’s Almanac; and access to handy research tools that enable subscribers to do their own research and update market indicators and strategies.
Other products from the Hirsch Organization include: THE LITTLE BOOK OF STOCK MARKET CYCLES (Wiley; August 2012; Hardcover and E-book, $22.95 and SUPER BOOM: WHY THE DOW JONES WILL HIT 38,820 AND HOW YOU CAN PROFIT FROM IT (Wiley; April 2011; Hardcover and E- $24.95).
The Stock Trader’s Almanac Blog (http://blog.stocktradersalmanac.com/) provides daily trading sentiment and keeps Almanac followers up to date on indicators, hot-topics, market happenings, speaking, news, and media coverage.
See here for Hirsch's 2016 Outlook and Election Year Cycle Updates.
Additional Information
2016 Outlook
Unfortunately, our outlook for 2016 is less than sanguine. There is a low probability for substantial gains in 2016. Election years have been considerably weaker in recent history and eighth years of presidential terms represent the worst of election years since 1920.
Currently, the best three quarters of the 4-year cycle (midterm Q4 and pre-election Q1–2) and usual 50% move from the midterm low to the pre-election year high are well below average.
After a sideways move through Q3 2015, we should end 2015 near a slightly higher new high. The next bear market may begin near the end of 2015 or in 2016 and take the market 20–30% lower into 2017–2018 in last cyclical, garden-variety bear market that finally puts an end to this secular that began in early 2000.
We do not expect much upside over the next few years in the market. But after the next bear market, our Super Boom forecast should kick in. We have raised the floor on our initial forecast, but the 500+% move to Dow 38820 by 2025 is still on target.
Election-Year Markets
Only two loses in the last seven months of election years. Regardless which Party is victorious, the last seven months have seen gains on the S&P in 14 of the 16 presidential election years since 1950.
First Five Months better when Party retains White House. Since 1901 there have been 28 presidential elections. When the Party in power retained the White House 17 times, the Dow was up 1.5% on average for the first five months, compared to a 4.6% loss the 11 times the Party was ousted. Since 1950, retaining the White House 8 times brought an average gain of 1.9% compared to –0.1% the other 8 times.
War can be a major factor in presidential races. Democrats used to lose the White House on foreign shores. Republicans, on the other hand, lost it here at home. Homeland issues dominated elections the last three decades. As we’ve learned over the years, it all depends on who the candidates are in 2016.
Market bottoms two years after a presidential election. A takeover of the White House by the opposing party in the past 50 years has resulted in a bottom within two years, except 1994, a flat year. When incumbent parties retained power stocks often bottomed within two years as well, except 1984 (three years, 1987), 2004 (one year, flat 2005), and 2012 (no bottom, QE). Whatever the outcome in 2016, we could see a bottom by 2018.
Only six election year declines greater than 5% since 1896. Presidential election years are the second best performing year of the four-year cycle, producing loss of greater than 5% in only six of those 30 years. Incumbent parties lost power in five of those years.