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The benchmark S&P 500 has added 3.1 percent year-to-date, propelled by the president securing an initial trade deal with China and the Senate ratifying the United States-Mexico-Canada Agreement. The index has already closed in record territory six times this year.
In years when an incumbent U.S. president has sought reelection, “stocks tended to do extremely well,” said Ryan Detrick, senior markets strategist for LPL Financial.
Dating back to 1950, the S&P 500 is a perfect nine for nine in posting gains during years when the incumbent campaigns for another term, climbing an average of 11.7 percent, according to LPL Financial.
“Given most presidents who have run a second time have tended to win, this could be the market’s way of saying it is comfortable with the status quo over change,” Detrick said.
An 11.7 percent gain would propel the S&P 500 to 3,615 by the end of the year, but even the most bullish Wall Street strategists aren’t that optimistic.
Going into 2020, nine strategists tracked by FOX Business had a year-end consensus forecast of 3,282 – 1.5 percent below where the S&P 500 settled on Friday.
Goldman Sachs' David Kostin, who was most among the most bullish of the strategists tracked by FOX Business, has a year-end target of 3,400. He believes that “rising political and policy uncertainty will keep the index range-bound” for most of the year.
Meanwhile, UBS’ Francois Trahan, who was tied with Bank of America’s Mike Wilson as the most pessimistic strategist going into 2020, has already raised his year-end target to 3,250 from 3,000.
The index is likely to struggle in the first six months of the year while rebounding in the second half, he wrote.
The S&P 500’s strong start to 2020, which when annualized amounts to a gain of 91 percent and would be the best year in history, according to FactSet data, is going against the grain of what typically happens in an election year.
Wells Fargo Investment Institute found stocks tend to be flat in the first six months before clarity on the winner drives action during the second half.
“The difference has tended to be stark, depending upon whether the incumbent party seems likely to ‘keep’ the White House,” the institute wrote.
The stock market is “stronger than average” when the incumbent wins but struggles in the second half if the challenging party takes the White House, it says.