Election Connections

Comments Off by in CMW News
March 4, 2016
Election Connections

Well, by this time a year ago index benchmarks we follow were roughly 8-10 points ahead of where they are today—in the middle of the most muddled election cycle any of us probably remember. There are sirens all around us, from what is being bemoaned about the global economy, to market volatility, to the upending of well-worn political patterns. There seem to be no signs of stability in ‘what’s going on out there’.

Yet, we remain confident in our investment philosophy and the strategies we have designed. Why? Because, it’s for just such circumstances that these strategies are intended to address. Being globally diversified during ‘good times’ is actually not very exciting. But when there seems to be little reason to remain invested, if this approach achieves its intent, as it has in the past, we will be better off than if we had altered or abandoned our strategy. If it doesn’t, it’s highly unlikely there is any alternative approach that would have fared better in reaching our goals.

According to the Individual Investment Association of America-IIAA, before this bull market began:

  • In March 2009 less than 20% of individual investors were “bullish” (had a positive outlook on the U.S. Stocks)
  • At the end of 2015 the percentage of “bullish” investors increased to almost 32%. That’s surprising if we recognize that in October 2007 the S&P 500 reached its last highest closing for the 5 and a half following years in 2013!

That’s a long time to go without a record breaking peak. But investors became more bullish as the S&P started breaking new record highs in March 2013.

  • There have been 107 record breakers from then til now, just 3 short years later!
  • 5 and a-half years since the highest peak and then 107 “highest peaks” in 3 years! Makes one wonder why only 32% of investors are bullish with a record like that.
  • That’s 44 record breaking highs in 2013, 53 in 2014 and 20 plus in 2015.

So what about this Bull? Last year it extended into its 81st month. This bull is the 11th for the S&P 500 since 1950 and is the third longest running bull market since 1950.

  • First, this is an election year, the 4th year of President Obama’s 2nd
  • Out of the last 20 presidential 4th years the S&P 500 has had a positive total return for 17 of the 20. Of course, past performance is no assurance of future results. However, we believe this bull market and the economy that supports it still has solid fundamentals and room to continue.

According to the most recent report on the US economy from the Conference Board, “. . . the current behavior of the composite indexes and their components suggest that the expansion in economic activity should continue in the near term, but the pace of growth will remain modest.”

We’re betting on this bull for another year!