Alpha Power Investing NewsletterFebruary 1, 2017
A Time-Tested Post-Election Year Strategy
Over the course of many decades, the year after a U.S. presidential election - heretofore referred to as a "Post-Election Year" - gained a reputation as being a difficult year for investors in the stock market. Like many trends in the stock market, this assertion proved to be cyclical. On the other hand, certain trends have persisted. One of those persistent trends is the tendency for the stock market to perform well during the "Power Zone" months within a post-election year.
As most Alpha investors are aware, the "Power Zone" months for the S&P MidCap 400 Index within any calendar year are January through May and November through December. So for our purposes we will define "Post-Election Year Power Zones" as those seven months within the course of a post-election year.
Since the creation of the S&P MidCap 400 Index in 1981, there have been nine post-election years. Figure 1 displays the cumulative % gain achieved by buying and holding the S&P MidCap 400 Index only during the Post-Election Year Power Zones starting in 1981.
The February-March period in 2001 witnessed a drawdown of -12.7% and the January-February period in 2009 experienced a drawdown of -16.2%. So as with anything related to the stock market, investors must be prepared for the occasional - and sometimes swift - downdraft. Still, it should be noted that these temporary declines were reversed within 2 months and 8 months, respectively.
It is also interesting to note the high percentage of months that generated a gain within the Post-Election Year Power Zones as displayed in Figure 2.
As you can see in Figure 2, 78% of all Post-Election Year Power Zone months since 1981 have witnessed a gain for the S&P MidCap 400 Index. This indicates a high level of consistency. For comparison's sake, if we exclude these Post-Election Year Power Zone months and look only at all other months starting in 1981, only 60% of those witnessed a gain for the S&P MidCap 400 Index.
Finally, Figure 3 displays the cumulative gain for the S&P MidCap 400 Index only during the seven Power Zone months within each post-election year since 1981.
When it comes to the stock market nothing is ever guaranteed, and "Past is NOT always Prologue." Still the results presented here highlight a consistent level of performance for investors who understand and appreciate the potential associated with exploiting seasonal trends in the stock market.
To learn more about our strategies, go to the Strategies and Performance page of our website at www.alphaim.net to read the brochures and fact sheets.
Disclosures: Past performance is not a guarantee of future performance. Indexes are not investment vehicles. The returns illustrated above are not returns of any Alpha strategy and do not include management fees or the cost of funds, trading, or other expenses. To see the impact of these costs, please refer to the net of fees and expenses performance data for specific Alpha strategies. The illustrations above are designed to quantify the effect of certain time periods on a representative market index.
Alpha Investment Management, Inc. is an SEC registered investment advisor. Such registration does not imply a certain skill or training and no inference to the contrary should be made. The information and opinions expressed in this document are for informational purposes only. Any recommendation or opinion made in this document may not be suitable for all investors. The information contained herein does not constitute and should not be construed as investment advice, an offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
© 2017 Alpha Investment Management, Inc.
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