Monday, January 23, 2012

Thoughts on Investing--from Jeffrey Hirsch

9% DJIA Gains In Election Years When Sitting President Runs

By Jeffrey A. Hirsch

Since the inception of the Dow Jones Industrial Average in 1896 there have been 19 presidential elections that a sitting president was running for reelection. DJIA posted gains in 14 of these 19 election years. There were only two losses greater than 5%. In 1932 as the Great Depression took hold, the DJIA fell 23.1% and President Hoover lost his reelection bid during the worst bear market in DJIA history that brought the blue chip average down 86% from April 1930 to July 1932. This was also the only incumbent to lose the office when the market was down.

Ironically, the DJIA posted gains during the four other election years when the incumbent lost. As WWII ravaged Europe in 1940 DJIA lost 12.7%. In all 19 years the DJIA gained 9% on average. When the incumbent was reelected DJIA gained 10.7% versus 4.3% in the years the incumbent was ousted. Markets feed off of a popular president or rally in celebration after an unpopular president is replaced.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.