If-Then Investment Planning Prior to an Election

Sheaff Brock | Pre-Election Investment Plan Based on Historical Data Since the 1930s

If-Then Investment Planning Prior to an Election

In classical logic, a connection is made between two statements, implying that if P (the proposition) is true, then Q (the next statement) is also true.

  • If Sarah works overtime, she’ll be paid time-and-a-half.
  • If I study, then I’ll get good grades.
  • If I get good grades, then I’ll get into a good college.

You get the idea—If statement #1, a given fact, is true, then statement #2 is a new fact that may be deduced from statement #1. Just as in many prior U.S. elections seasons, investors tend to engage in pre-election investment planning based on precisely that form of “if–then” thinking.

Addressing the No. 1 question currently on investors’ minds (What if the incumbent party loses the presidency???), Sheaff Brock Managing Director and Chief Investment Officer David Gilreath reviews market trends (as indicated by S&P 500 returns) in election years going all the way back to the 1930s….

Sheaff Brock 2020 Election Chartbook with S&P 500 Historical Performance Under Partisan Control Scenarios

While, as Gilreath is careful to remind investors, past performance is no guarantee of future results, pre-election investment planners should find this chart encouraging, as it traces positive investment results for the past half-century under all three scenarios (unified government, unified congress, split congress).

This time around, should a democratic sweep scare the markets? Probably not, is the conclusion of LPL Research, looking back at periods of time since 1951 when Democrats controlled both the White House and Congress.

Sheaff Brock Money Managers | What Impact a Democratic Sweep may have on Markets

If Strategas Research Partners are right again this time around, by Halloween night 2020, pre-election investment planners should have their if–then answer (Strategas predicted the 2016 election results at a time when Trump was way down in the polls). Their “secret”? Tracking S&P stock performance during the months of August, September, and October preceding an election. Historically (between 1936 and 2016), stocks have sold off ahead of an opposition party win, but have risen in price before an incumbent party outcome.

Sheaff Brock Money Managers | U.S. Stock Trending Similar to when Incumbent Party Loses Presidency

In classical logic, if statement #1, a given fact, is true, a new reality may be deduced. Will if–then pre-election investment planning follow that model? Wryly quoting Mark Twain’s “History doesn’t always repeat itself, but it often rhymes,” Sheaff Brock’s Dave Gilreath advises a wait-and-see attitude. 

Sheaff Brock Investment Advisors, LLC (“SBIA”) is an SEC-registered investment advisor founded in 2001. Clients or prospective clients are directed to SBIA’s Form ADV Part 2A prior to deciding to participate in any portfolio or making any investment decision. The views and opinions in the preceding commentary are subject to change without notice and are as of the date of the report. There is no guarantee that any market forecast set forth in the commentary will be realized. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice, and is not intended to predict or depict performance of any investment. Any specific recommendations or comparisons that are made as to particular securities or strategies are for illustrative purposes only and are not meant as investment advice for any reader.

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