With Europe
making the headlines again, it comes as no surprise that equities have been
selling off considerably. As of Thursday's close, the Dow has finished to
the downside in 11 out of the last 12 trading sessions. The "sell in
May and go away" strategy appears to working, yet again, much like it did
in 2011 and 2010. The cause for concern now is that many people fear that
Greece might exit the Euro zone. As
a result, this might cause a run on some of the other southern European banks,
like in Spain, Portugal and Italy. Some would even consider this as a
Lehman Brothers type scenario unless some resolution is agreed upon before it
gets to that point. Regardless of stock
valuations and fundamentals, investors have been motivated to take the “risk
off” approach in the near term. The
markets have been in either full “risk on” or “risk off” mode for the last
several months.
However, some
have argued that this year should be one to stay invested. Return data for election years in the past
has actually proven to be quite rosy in most instances. In prior election
years, (2008 excluded), the markets have shown considerable strength,
especially between the spring and autumn months. See yearly results here.
S&P 500 Stock
Market Returns
During Election Years |
||
Year
|
Return
|
Candidates
|
1928
|
43.6%
|
Hoover vs. Smith
|
1932
|
-8.2%
|
Roosevelt vs. Hoover
|
1936
|
33.9%
|
Roosevelt vs. Landon
|
1940
|
-9.8%
|
Roosevelt vs. Willkie
|
1944
|
19.7%
|
Roosevelt vs. Dewey
|
1948
|
5.5%
|
Truman vs. Dewey
|
1952
|
18.4%
|
Eisenhower vs. Stevenson
|
1956
|
6.6%
|
Eisenhower vs. Stevenson
|
1960
|
.50%
|
Kennedy vs. Nixon
|
1964
|
16.5%
|
Johnson vs. Goldwater
|
1968
|
11.1%
|
Nixon vs. Humphrey
|
1972
|
19.0%
|
Nixon vs. McGovern
|
1976
|
23.8%
|
Carter vs. Ford
|
1980
|
32.4%
|
Reagan vs. Carter
|
1984
|
6.3%
|
Reagan vs. Mondale
|
1988
|
16.8%
|
Bush vs. Dukakis
|
1992
|
7.6%
|
Clinton vs. Bush
|
1996
|
23%
|
Clinton vs. Dole
|
2000
|
-9.1%
|
Bush vs. Gore
|
2004
|
10.9%
|
Bush vs. Kerry
|
2008
|
-37%
|
Obama vs. McCain
|
2012
|
?
|
Obama vs. ?
|
Being that
2012 is an election year, there has been speculation amongst analysts that this
year could surprise many in a positive way. Unfortunately, the last three
weeks have come to prove that a positive surprise might not come so easy. Volatility has ticked up, and near term
concerns seem to far outweigh any positive prospects for the longer term. As long as issues in Europe continue, it will
likely be on the mind of investors.
At the same
time, Facebook goes public today, (ticker FB).
This comes at an interesting time because it seems to be stealing a lot
of the market’s thunder recently. There
seems to be less interest on the markets shifty movement and relentless
emphasis on what will be the largest internet IPO in history.
