With the election right around the corner, I thought it’d be interesting to see how the winner shapes the market. The truth? It’s the trend going into the election that matters a lot more than who takes the oath of office in January.
Below I have charts of the past three elections, and you can see that routine technical analysis helps us figure out where the market was going to head.
The 2000 election was easy and we would have guessed the trend would continue down.
2004 was a bit trickier and even if you hadn’t looked very long term and saw the current trend was a pause before a continued uptrend, you’d have been safe in guessing the next move wouldn’t be down.
2008 was interesting, though, and you’d normally think a post-election move would continue down. It did, but then reversed course to make a strong move up that’s lasted pretty much since early January. Keep in mind, however, the market was already down nearly 40% going into the election, and was ripe for a move up. Still, I’ll throw this into the “tough to predict” category.
That leads us to what happens after the election. Well, so far the market has been moving up since ’11. Is it now overbought (the opposite of late 2008)? Unlikely, as it’s up only 25% from the November lows.
Therefore, given both the current trend and the fact that it looks like there’s more room to rise, I’d say that either Romney or Obama will be gifted with a rising market.