Predicting what will happen next with the stock market is impossible. But that doesn’t mean you shouldn’t study the past. History may not predict the future, but it can be useful to look back and see how the market has reacted during certain events.
Presidential inaugurations are a perfect example.
Now that President Trump has been sworn into office, investors are wondering: What’s in store for the coming months?
As you can see from this week’s chart, we could reasonably expect a few ups and downs over the next few months.
Since Eisenhower’s presidential inauguration in 1953, the two-week post-inauguration return of the S&P 500 has averaged 0.80%.
This may seem like a really low average return, but think about it another way. The market has performed positively 77.8% of the time.
Generally speaking, the market reacts in a positive way over the first two weeks following a presidential inauguration.
However, in the weeks and months that follow, the returns tend to level out.
From the same post-inauguration data, the one-month average return has been -0.24%, while the three-month average return has been 0.5%.
And overall, the markets have been positive 44.4% of the time during the first month and 55.6% during the first three months.
It’s a wash. But let’s dig a little deeper...
Let’s look at how the markets have fared after a Republican was sworn into office. The two-week return then becomes -0.57% and has been positive 70% of the time.
If you’re paying attention, the negative average but strong odds of gains may seem deceiving. That’s because the period includes an 11.51% drop after President Ford took office following the resignation of President Nixon.
But during Ford’s term, the stock market bounced back nicely. It ended his term up more than 10%.
So the short-term return doesn’t tell the whole story.
With the plans President Trump has laid out, investors can expect a ton of opportunities. (We outlined a big one in last week’s chart.) And we have already started to see a few sectors, such as Financials and Defense, really take off.
Since the election results were announced, the S&P is up more than 6%.
It’s important to remember that the past does not predict the future. You should never hang your hat on these results.
Still... as I write, the market appears ready to break through to all-time highs.
Yes, there will be a hiccup or two along the way. But investors could be in line for some “yuge” returns in the coming weeks, months and even years.