Retirement Viewpoints
The 515 Hamilton Group at Morgan Stanley
October 2016
Election Cycles Mean More Than Just
Choosing a President
Wealth Management
515 W Hamilton St., 7th Floor
Allentown, PA 18101
•••
Patricia Peoples ChFC®, CLU®
CERTIFIED FINANCIAL PLANNER™
Vice President
Financial Advisor
[email protected]
NMLS: 1285326
Phone: 610-398-6505/ 800-433-4200
Philip Segal RICP®, ChFC®, CLU®
Vice President
Senior Portfolio Manger
[email protected]
NMLS: 1270161
Phone: 610-391-6331/ 610-433-4200
Duane Peoples
Financial Advisor
[email protected]
NMLS: 1462320
Phone: 610-398-5404/ 800-433-4200
Our website:
http://www.morganstanleyfa.com/515
hamiltongroup/index.htm
houses the Allentown Phantoms hockey team and the
Lehigh Valley Steel Hawks indoor football team.
When people think about cycles in the stock market,
they tend to look at the obvious drivers of stock prices: major
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a presidential
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be a key pivot point
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of the biggest
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trends?
in
the country.
Consider the average yearly performance of the stock
market in the table below. After accounting for random
volatility,
averagefinancial
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performance
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We welcome you to visit us at our new location
What’s Going On?
Election years tend to have a degree of uncertainty
over the future direction of the country, and the market may
translate that uncertainly into some reluctance to commit on
the part of investors. Then, after the direction is set, it may
take some time for policy changes to assert any influence,
further depressing investment demand. By the third year,
clarity could return and investors could embrace the future.
Exceptions May Be More Powerful Than the Generalities
Keep in mind that the amount of variation in annual
returns is substantial, and is reflected in the high variability,
measured by standard deviation. As a consequence, the
chances are good that performance in any given year could
end up being far different from the average for its category.
The 515 Hamilton Group at Morgan Stanley
Page 1
Retirement Viewpoints
Stock Market Performance and the Election Cycle1
Calendar years:
1928 - 2014
Presidential First year after
each
election years:
presidential
1928 - 2014
election
Second year
after each
presidential
election
Third year after
each
presidential
election
Average
returns
11.8%
11.1%
9.2%
9.1%
18.3%
Standard
deviation of
the returns
20%
17%
22%
21%
20%
For Illustrative Purposes Only.
That becomes clear when looking at the extremely good and extremely bad performing years in
the S&P 500 performance data set. The four best years were 1928 (44%), 1933 (53%), 1935 (60%), and
1954 (52%). The four worst years were 1931 (-41%), 1937 (-34%), 1974 (-26%), and 2008 (-37%).1
No two of the extreme up years occurred at the same point in an election cycle, neither did any
two of the extreme down years. Three of the extreme years are associated with Democratic
incumbents and five with Republican incumbents. Ultimately, six of the eight extreme performance
years were associated with unpredictable macroeconomic tidal waves--the Great Depression, the oil
price shock (when energy prices quadrupled in a few months), and the recent financial crisis --events
much bigger than any election news.
So if you are thinking of cashing in on an election year rally--or selling before an election year
rout--think again. As history has shown, trying to time the market--for whatever reason--is often a
loser’s game. Instead, work with your financial advisor to determine an appropriate long-term asset
allocation that suits your goals and needs.
Sources
1Source:
Wealth Management Systems Inc., a DST company. Returns based on yearly total return of the
S&P 500 for the period from January 1, 1928, to December 31, 2014. The S&P 500 has performance
data going back to 1926, including the elections that occurred in 1928 and everyfour years thereafter. It
is an unmanaged index generally considered representative of the US stock market. Investors cannot
Sources
invest directly in any index. Index returns do not represent the performance of any actual investment
and do1Source:
not reflect
the costs
and commissions
associated
with investing.
Past
performance
Wealth
Management
Systems Inc.,
a DST company.
Returns
based
on yearlydoes
totalnot
return
predict
future
results.
If
you’d
like
to
learn
more,
Please
contact
Philip
Segal,
Patricia
Peoples,
or
Duane
Peoples.
of the &P 500 for the period from January 1, 1928, to December 31, 2014. The S&P 500 has
performance data going back to 1926, including the elections that occurred in 1928 and every
515 Hamilton Group at Morgan Stanley
Page 2
STANDARD DEVIATION. A statistical measure of volatility (risk) demonstrating the degree to which an investment’s
returns have varied over time.
Asset Allocation does not assure a profit or protect against loss in declining financial markets.
The author(s) and/or publication are neither employees of nor affiliated with Morgan Stanley Smith Barney LLC
("Morgan Stanley"). By providing this third party publication, we are not implying an affiliation, sponsorship,
endorsement, approval, investigation, verification or monitoring by Morgan Stanley of any information contained in
the publication.
The opinions expressed by the authors are solely their own and do not necessarily reflect those of Morgan Stanley.
The information and data in the article or publication has been obtained from sources outside of Morgan Stanley and
Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of information or data
from sources outside of Morgan Stanley. Neither the information provided nor any opinion expressed constitutes a
solicitation by Morgan Stanley with respect to the purchase or sale of any security, investment, strategy or product
that may be mentioned.
Article by Wealth Management Systems Inc. and provided courtesy of Morgan Stanley Financial Advisor.
Patricia Peoples, Duane Peoples, or Philip Segal may only transact business, follow-up with individualized responses,
or render personalized investment advice for compensation, in states where they are registered or excluded or
exempted from registration, [http://www.morganstanleyfa.com/515hamiltongroup/index.htm or FINRA Broker Check
http://brokercheck.finra.org/Search/Search.aspx].
© 2016 Morgan Stanley Smith Barney LLC. Member SIPC.
CRC 1562992 08/16
Don't Forget to Vote
Election day this year is Tuesday November 8th. Once a year we get to choose those men and
women who will represent us in federal, state, or local elections. This year we get to choose the next
President, the 435 members of the Congress, and about one third of the Senate. During the last 227 years,
our country faced wars, economic crises, and natural disasters. Voting is a right that our
forefather/foremothers have fought for. The choice is yours as to who will be elected. If you know you
won't be able to vote at your local on the 8th if for example you'll be travelling, make sure you arrange to
get an absentee ballot and mail it in time.
515 Hamilton Group at Morgan Stanley
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Retirement Viewpoints
The views expressed herein are those of the authors and do not necessarily reflect the views of Morgan
Stanley or its affiliates. All opinions are subject to change without notice. Neither the information
provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past
performance is no guarantee of future results.
Equity securities may fluctuate in response to news on companies, industries, market conditions and
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CRC 1603064
515 Hamilton Group at Morgan Stanley
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