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Index IDEA: Examining US Market in Presidential Election Years

Index IDEA: FTSE Russell Examines US Market Performance in Presidential Election Years Since 1980

Coming off the worst January since 2009, US markets have the constant news barrage that comes with a presidential election cycle in addition to heightened global equity market volatility to contend with as we begin 2016.

For historical perspective, global index provider FTSE Russell recently examined US equity market performance during the last year of presidential terms for all US presidents since Ronald Reagan. And, while the political cycle is just one factor weighing on market performance, a closer look at Russell US index returns over the last three and a half decades indicates that the fourth year of a US presidential term, particularly for second term presidents, has been a strong one for US stocks.

  • According to FTSE Russell, the Russell 1000® Index, reflecting US large cap stocks, and the Russell 2000® Index, reflecting US small cap stocks, have had positive returns in nearly every fourth year of a US presidential term since Ronald Reagan first took office in 1980. The only exceptions were in the midst of the global financial crisis in 2008 for the Russell 1000® Index and Russell 2000® Index (US large- and small-cap stocks, respectively) and in 1984 for the Russell 2000® Index (US small cap US stocks).
  • And, examining the last year of the second term for all two term presidents during this same period (excepting one term 41st US President George H.W. Bush), all were positive with the exception of 2008.

Read the complete 4Q 2015 Small Cap Perspectives for more.

Mat Lystra, Senior Index Research Analyst, FTSE Russell:

“Historical index analysis suggests that, while past performance is no guarantee of future results, US markets may get caught up in the optimism that an election brings, be it the promise of something new or the continuation of something good.”

 

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