The Election Rally Just Aced Its First Test

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The 2024 election looks like it will be quite the slog…

As of Friday’s polling data from ABC News’ 538, 55% of Americans hold an unfavorable opinion of President Joe Biden. Meanwhile, 53% of Americans feel the same about former President Donald Trump.

In other words, the majority of voters prefer neither candidate. But that’s not how American democracy works…

The election will proceed. And come November, one of these two men will almost certainly be the winner.

When it comes time to cast ballots, voters will likely choose their “least bad” option. It’s a bleak political backdrop. And you might expect this to drain investor sentiment, too.

But in reality, the 2024 bull market is running strong.

The market rally passed a critical test of resilience in January… and it points to a positive year ahead for stocks.

When it comes to U.S. presidential politics, don’t overlook Ohio. After all, “As Ohio goes, so goes the nation.” Historically, whoever wins in Ohio has typically won the presidential race.

We have a similar saying in finance, too: “As January goes, so goes the year.”

January tends to act as a “bellwether” month. A good return in January correlates to a good year for stocks, and vice versa.

Stocks rose about 2% last month. This performance is already a positive sign for the market… But according to history, we should be especially bullish after a strong January in an election year.

I’ve discussed how elections support the stock market before in DailyWealth. Here’s what I said on the subject last month…

It’s worth noting that elections are reliably bullish. Stocks were positive in 20 of the past 24 election years… resulting in a strong win rate of 83%.

Elections and a strong performance in January are each bullish for stocks. But I wanted to see what happens when you have both in the same year…

To test this, I found the one-month returns for every positive January in an election year going back to 1928. Then, I measured what the market returned over the next year.

The results were overwhelmingly bullish. Take a look…

The U.S. has had 24 election years since 1928. And 11 of those had a positive January return…

In every case, January gains led to higher stock prices a year later. And more often than not, the market outperformed, too…

Stocks return an average of about 6% a year with a typical buy-and-hold strategy. But the average return soars to 11% when you buy after a strong January in an election year. And 73% of the time, stocks return double-digit gains.

In short, last month’s performance spells a big year for stocks.

Don’t let this year’s political scene get you too shaken up. History shows stocks are likely to surge after the dust settles – regardless of the outcome.

Good investing,

Sean Michael Cummings


This article was originally published on this site