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By Pat McKeough, TSINetwork.ca
Special to the Financial Independence Hub
The U.S. election year stock market rule can be profitable for investors in any political climate.
As we’ve pointed out in the past, an election year stock market tends to go on an above-average rise in U.S. Presidential election years. This provides a statistical rationale for optimism in 2016, since the next election is this November. But it’s no guarantee that the market will rise substantially, for a couple of reasons.
First, several ominous factors are weighing on the market right now, in addition to the election. These include the outlook for interest rates; the trend in prices for oil and other commodities; the rise in terrorist activity; the Chinese economic slowdown; and the sharp rise in the U.S. dollar and corresponding drop in the Canadian dollar.
An abrupt shift in any of these factors could have a big influence on the market for the remainder of the year and beyond.
Obama diverging from usual pattern
Second—more important—the election-year indicator works because U.S. politicians have a characteristic way of behaving during these years. President Obama is diverging from the traditional pattern that helped spur market gains in past election years.
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