Election's over

Now what?

The fine folks at ChartOfTheDay reminded us today that the year following a presidential election is not generally a particularly good one for the market.

post-election year market performance Market performance following a presidential election

Presumably, the party in power before the election juiced the economy to enhance their own chances of re-election, and now that it's over, there's a letdown. Also, as the new president takes office, a crisis of uncertainty grips the market — what will he (or she, someday) really do? There's also usually a bit of muddling through as the new administration gets its act together.

But although there's an average year, there's really no such thing; nor is there an average post-election year, really. Combine that with the fact that the economy — virtually worldwide — has been driven into such a mess by the outgoing Republicraps, and there's really no telling what 2009 will bring.

DJIA 2-year chart Dow Jones Industrials 2-year chart
Nasdaq composite 2-year chart Nasdaq composite 2-year chart

On the other hand, it's good to remember that the stock market is a leading indicator; it both collapses and recovers before the economy itself. After all, stock prices reflect the omniscient Market's best guess about what will happen in a few months. Right now, it's looking like most guesses are that the economy is on the mend, incredible as that may be.

The two-year charts for both the Dow Industrials and the Nasdaq composite indexes show a definite bottom in late 2008. That doesn't mean there won't be a second bottom, of course, but it does give cause for hope. There will be a massive stimulus package, and if it is focused on job-creation — as so many want it to — it will likely give the economy the jump-start it so badly needs.

That's my story, and I'm sticking to it — until I change my mind.