Chinese New Year – year of the rooster

This coming Saturday will be the start of the Chinese New Year.

The following chart plots the average performance of the S&P 500 Index for each animal year since 1950. For example, Ox years started in 1961, 1973, 1985, 1997, 2009; and the average performance of the market in those (Chinese) years was +14.0%.

NB. The Chinese calendar is based on the lunar year cycle and so performance has been calculated for each lunar year – not the corresponding calendar year.

Chinese calendar and S&P 500 [1950-2017]

The Chinese New Year starting this Saturday will be the Year of the Rooster!

This is not necessarily good news for investors. Since 1950 rooster years have had the worst average returns of the S&P 500 Index of any of the Chinese zodiac animals. Over the last 50 or so years the average lunar year return for rooster years has been -4.1%.

The year just ending was the year of the monkey. On average monkey years have seen an S&P 500 return of 9.8%. In the monkey year just passed the actual S&P 500 return was 22.5%.


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United States presidential inauguration day

The United States presidential inauguration day used to be on 4th March, but in 1937 the Twentieth Amendment changed the date of inauguration day to 20 January. If that day is a Sunday, inauguration day is moved to 21 January.

Has this day had any significant effect on the stock market?

Let’s see.

The following chart plots the daily returns for the S&P 500 Index for inauguration day (ID) in the years from 1953 to 2009. Note: the chart only includes inauguration days for first terms (on the grounds that the market most likely knows what to expect with second-term presidents).

US president inauguration days (first term) [1953-2009] 1

As can be seen shares have been weak on inauguration days. Since the 1963 inauguration of Lyndon B. Johnson the S&P 500 has been down on every inauguration day.

The following chart plots the average daily returns for the S&P 500 Index for the trading day before inauguration day, the day itself and the day after.

US president inauguration days (first term) [1953-2009] 3

Since 1953 the average daily return for the S&P 500 on inauguration day has been -1.1%. For the day after ID the average daily return is 0.7%, so there does seem to be a partial relief rally afterwards.

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Trading days around US presidential elections

How does the UK market trade in the days around US presidential elections?

US presidential elections are held every fours years on the Tuesday following the first Monday in November (hence they are always between 2nd and 8th November). The newly elected president takes office at midday on Inauguration Day (20 January the following year).

In 2016 the US presidential election will take place on 8 November.

The table below shows the results of analysing the FT All-Share index for the 9 days around each US election since 1972.

  • Days 1-4: are the four trading days leading up to the election
  • Day 5: is the election day
  • Days 6-9: are the four trading days following the election
Day 1 2 3 4 5 6 7 8 9
Proportion of days up(%) 45 73 64 55 64 55 45 55 45
Average daily return(%) 0.56 0.33 0.39 0.36 0.64 -0.18 -0.49 0.29 -0.39
Standard deviation 2.45 0.66 1.11 1.05 1.35 0.95 2.09 1.17 1.28

The average return for each day is shown in the chart below.

FTSE All-Share around US presidential elections [1972-2012]

As can be seen, the UK market tends to trade stronger in the four days before the election, and is weaker in the few days following the election. The strongest day of the period has been the election day itself.


The above is an extract from the Harriman Stock Market Almanac.

See also: other articles on politics and markets.

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Gold and US presidential elections

How has the price of gold reacted to US presidential elections?

Day returns

The following chart plots the average daily returns of gold for the nine days around the US presidential elections (1968-2012). So, the chart covers the period of the 4 days before the election and the 4 days after. For example, for the 12 US presidential elections from 1968 the price of gold has increased on average 0.2% on the day of the election itself (D0).

Gold and US presidential elections [1968-2012] (1)

As can be seen…well, in fact, nothing much can be seen as there’s no clearly discernible pattern of behaviour here.

Let’s now see if there’s any significant difference in behaviour depending on whether a Democrat or Republican wins the election.

The following chart plots the average daily returns for gold for the election day and four following days. The averages are split as the  average for the five times a Democrat has won compared to the seven times a Republican has won.

For example, in the five elections that a Democrat has won the White House, the average daily return of gold the day following the election (+1D) has been 1.1%.

Gold and US presidential elections [1968-2012] (2)

Generally, the price of gold has been stronger following a Democrat win, and especially strong on the day following the election.

Let’s now zoom out time-wise and look at gold’s month returns around the elections.

Month returns

The following chart shows gold’s average month returns for the three months before, and three months after, US presidential elections.

Gold and US presidential elections [1968-2012] (3)

Historically, the gold price has been weak in the month leading up to the election (-1M) with an average month return of -1.8%. Following the election the price has tended to bounce back, with an average return in the following month of 1.1%.

The following chart plots the proportion of months seeing positive returns in these six months around the election. For example, the price of gold has only risen four times in the month before an election in the 12 elections since 1968.

Gold and US presidential elections [1968-2012] (4)

This chart largely supports the the observation in the preceding chart which is that the price of gold is weak in the month preceding an election, and strong in the following month.

Now to see if there is any difference in the behaviour depending on whether Democrat or Republican wins the White House.

Gold and US presidential elections [1968-2012] (5)

In the month following an election gold has risen on average 1.7% if a Democrat won, and 0.7% if a Republican won. The performance differential becomes more pronounced in the second and third month after the election – with gold seeing month returns of over 4% in the case of a Democrat win, and negative month returns in the case of a Republican win.

Caveat: this analysis involves a very small sample size (there have been just 12 elections since 1968) so the results can not be regarded as statistically significant. But, given that caveat, it does seem that gold loves Democrats!

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US Democrat/Republican president portfolios

Market performance by president

The chart below shows the performance of the UK market (FT All-Share index) over the periods the respective US presidents were in office.

FT All-Share return over US presidential terms

From the point of view of the UK market the best president was Jimmy Carter – the market rose 145% during his 4 years as president. The worst spell was the second term Richard Nixon when the market fell 42%.

Market performance by party of the president

The chart below plots the values of two simulated portfolios both starting with a value of 100 at the 1948 US presidential election:

  • Democrat portfolio: only invests in the UK stock market when there is a Democrat in the White House, and is in cash when the president is a Republican.
  • Republican portfolio: reverse of the above.

Democrat v Republican FTSE All Share Portfolios

The two portfolios have largely tracked each other closely until the 2008 election of Barack Obama. From this period, the Democrat portfolio performed strongly, such that by 2016 this portfolio had a value of 1344 compared with a value of 639 for the Republican portfolio.


See also: other articles on politics and markets.

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UK equities and the US presidential election cycle

The chart below shows the 4-year US presidential election cycle (PEC) superimposed on the FT All-Share index from 1956. The vertical bars indicate the timing of the November elections every four years.

FT All-Share Index and 4-year US election cycle

It can be seen that on occasions the US presidential election has (approximately) coincided with significant turning points in the UK market; notably those elections in 1960, 1968, 1972, 1976,2000, and 2008.

Returns in each year of the PEC

The following chart shows the average annual returns for the FT All-Share Index for each of the four years in the US presidential election cycle. PEC(1) is the first full year after a presidential election, PEC(4) is the election year.

FTSE All-Share and 4-yr PEC (annual returns)

Typically, presidents have primed the economy in the year before elections [PEC(3)] – or, at least, stock markets have expected them to do so.

And the following chart plots the proportion of years that saw positive returns in each of the four years in the PEC.

FTSE All-Share and 4-yr PEC (positive returns)

For the 15 presidential cycles from 1948 to 2008, the FT All-Share Index saw positive returns in every third year of the cycle. But in the two cycles since 2008, the Index has had negative returns in PEC(3).

US presidential election data

For reference below is data on the US presidential elections since 1948.

Election date Elected President Party Popular vote(%) Electoral vote
02 Nov 1948 Harry Truman Dem 49.6 303
04 Nov 1952 Dwight Eisenhower Rep 55.2 442
06 Nov 1956 Dwight Eisenhower Rep 57.4 457
08 Nov 1960 John Kennedy Dem 49.7 303
03 Nov 1964 Lyndon Johnson Dem 61.1 486
05 Nov 1968 Richard Nixon Rep 43.4 301
07 Nov 1972 Richard Nixon Rep 60.7 520
02 Nov 1976 Jimmy Carter Dem 50.1 297
04 Nov 1980 Ronald Reagan Rep 50.7 489
06 Nov 1984 Ronald Reagan Rep 58.8 525
08 Nov 1988 George H. W. Bush Rep 53.4 426
03 Nov 1992 Bill Clinton Dem 43.0 370
05 Nov 1996 Bill Clinton Dem 49.2 379
07 Nov 2000 George W. Bush Rep 47.9 271
02 Nov 2004 George W. Bush Rep 50.7 286
04 Nov 2008 Barack Obama Dem 46.2 365
06 Nov 2012 Barack Obama Dem 48.1 332

See also: other articles on US elections

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Equities in US presidential election years

The 14 charts below show the performance of the FTSE All-Share index over the 12 months of a US presidential election year. For example, the first chart shows the January-December performance of the UK market in 1960, the year John Kennedy was elected President of the United States. The dashed line in each chart indicates the date of the election.

Market in US presidential elections years

Historically, the UK market tends to rise in the few weeks leading up to the election.

The following chart plots the annual returns of the FT All-Share Index in years of US presidential elections.

FT All-Share annual returns in US presidential years


See also:

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GBP and USD in 3Q 2016

GBP

The following chart gives the changes in changes currency rate for the UK pound for the third quarter 2016. For example, the UK pound fell 9.1% against the South African Rand in 3Q 2016.

GBP forex rates 3Q 2016

USD

The following chart gives the changes in changes currency rate for the US dollar for the third quarter 2016. For example, the US dollar increased 1.1% against the Canadian dollar in 3Q 2016.

USD forex rates 3Q 2016

 

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International markets 2016 3Q YTD

The following charts plot the performance of a selection of world markets over the first three quarters of 2016. 

Domestic currency

International markets 2016 3Q YTD returns

GBP

The following chart plots the GBP-adjusted returns (i.e. these are the returns for a GB pound investor).

International markets 2016 3Q YTD [GBP] returns

USD

The following chart plots the USD-adjusted returns (i.e. these are returns for a US dollar investor).

International markets 2016 3Q YTD [USD] returns

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International markets 2016 3Q

The following charts plot the performance of a selection of world markets in the 3rd quarter 2016. 

Domestic currency

International markets 2016 3Q returns

GBP

The following chart plots the GBP-adjusted returns (i.e. these are the returns for a GB pound investor).

International markets 2016 3Q [GBP] returns

USD

The following chart plots the USD-adjusted returns (i.e. these are returns for a US dollar investor).

International markets 2016 3Q [USD] returns

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