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Dollars & Sense: Election Years and the Stock Market

Dollars & Sense: Election Years and the Stock Market

By Roberta L Nestor

Probably the number one question to financial advisors in 2016 has been, “What will happen in the market if Clinton is elected or if Trump is elected?” Advisors certainly have opinions on market outcomes, however, they are just that, opinions. The good news is that we have lots of history to look at and statistical data that may give some insight. For compliance purposes it is important to remind you that past performance is no guarantee of future results. Talk to your financial advisor before making any investing decisions!

Here is a chart that speaks for itself from S&P Capital IQ (CNN Money):

stock-market-performance

History shows that the S&P 500 has had stronger returns under a Democratic administration versus a Republican administration. It further shows that under Democratic administrations there have been 7 recessions and 16 bear markets, while not a strong showing, under Republican administrations there have been 14 recessions and 18 bear markets.

Market sectors are also affected by which administration is in office. Sectors such as health care, consumer staples and alternative energy tend to fare better with a Democratic office. On September 21, 2015 Clinton announced that they plan to “hold the pharmaceutical industry accountable and to rein in drug costs”. As a result of that campaign promise pharmaceutical stocks swiftly reacted within the next five days the S& P Pharmaceutical Industry Index dropped over 6%.

As with past Republican administrations, Trump should be good for the energy sector including oil, natural gas and especially coal. Since Trump consistently talks about our dependency on foreign energy it would be more likely that if he imposes trade restrictions on foreign energy sources, the U.S. energy firms would benefit from being able to sell and produce more. The construction industry might also benefit – especially if we build “the wall”.

One thing is for certain, the markets do not like uncertainty, so the sooner the election results are in, the better for investors!

Roberta L. Nestor is a financial advisor practicing at 491 New Haven Avenue in Milford, CT offering retirement, long term care, investment and tax planning services. She also offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network – a member FINRA/SIPC and a Registered Investment Adviser. Fixed insurance products offered through Nestor Financial Network are separate and unrelated to Commonwealth. Commonwealth Financial Network or Nestor Financial Network does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation. Roberta can be reached at Nestor Financial Network, 203-876-8066 or roberta@nestorfinancial.com.

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