U.S. Presidential Election: Is now the time to buy stocks?

U.S. Presidential Election: Is now the time to buy stocks?

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Regardless, of which candidate comes to office, equities will rise. The issue is not whether stocks will rise, but when they will. Stocks won't rise significantly this time because it does not seem likely that the incumbent will have a landslide victory.

The tight race points to a pattern where equities will adjust to the news of the election results on November 4 and then gradually rise a year from the date. Investors should capitalize on this important timeline of the U.S. presidential elections that more often than not increases portfolio sizes.

There is a lot of stuff out there with analysts harping that it is the economy and not the stock market that will show who will win. Nonetheless, the S&P 500 performance three months prior to the election has been a reliable indicator of who will come to power. If it performs well, the incumbent (in this case, President Obama) will win and the reverse is true if the S&P 500 declines.

Vote Democrat?

Going back to 1965, the yearly compounded S&P 500 gain on average with dividends included was 10.9 percent with a Democrat in the White House. In contrast, a Republican President saw a 7.3 percent gain. It can be seen that there is considerable volatility across each four-year presidential terms.  Then it is definitely difficult to predict exactly the stock market performance in the coming presidential term. Nevertheless, voters can keep this in mind when casting their ballot.

Game Plan

Investors should look to pick stocks with great fundamentals preferably in the Dow and the S&P 500. Google, Microsoft, IBM and FedEx among others have had disappointing earnings reports, but there are bank stocks (Citigroup excluded) that look promising.