In its 2020 outlook regarding the impact of politics on the market, Hirsch writes, “Bareknuckle politics promises to heighten market volatility in 2020 as the battle for control in Washington kicks into high gear. But even the most pugnacious campaigns by both parties will be hard-pressed to derail this secular bull market.’’
Since 1943, the almanac says, “the third year of the cycle is up 15.0% on average for the Dow and 15.4% for the S&P 500. Since 1971, the NASDAQ averages a whopping 28.8% in the third year of the 4-year cycle.’’
“We call this cycle the quadrennial quadrille, as every four years we do this dance of us electing a new president,’’ Hirsch said. “That is what drives the four-year cycle. There’s lots of upward, bullish buyouts in the third year of the four years, where there are the cycle’s greatest gains. The politicians try to prime the pump so the electorate is in the best mood possible economically going into an election year.’’
The almanac does not embrace predictions that a recession and a down market are ahead for 2020. "Incumbency is a powerful phenomenon and the driving force behind the four-year presidential election cycle," he said. "From 1949 through 2018, the stock market has performed much better in election years when a sitting president is running for reelection."
The Dow was up 10.1% in incumbent years vs. 5.3% in all election years, and minus 1.6% in election years with an open field, he said.
Does Hirsch see this precedent crumbling because of Trump’s potential impeachment and Senate trial?
“Only if he looks like he is going to be kicked out of office and we have very few examples of that," he said.
Hirsch is more concerned about the trade war between the U.S. and China than the upcoming election.
"If I were running for president, I would get that deal made. I am no trade rep or international economist, but the trade issue is the thing that is impacting economics most. We’d all like to see it fixed and it would behoove him and his candidacy to get it worked out."