Stock market making strange pre-election move

Like many things about this year’s presidential race between Hillary Clinton and Donald Trump, the stock market’s behavior even looks to be breaking with the norm.

Typically in the week before a presidential election, there’s a stock market rally. Those rallies have resulted in an average gain of 1.8 percent for the S&P 500 in the week before all presidential elections, going back to 1928, according to a study by Bespoke.
While it’s early to say, if the S&P 500 continues its weak performance and is lower after next Tuesday’s close, it would be only the third time in 23 presidential elections that the stock market fell in the week before a president was elected. As of Thursday’s close, the S&P is down 1.1 percent loss since Tuesday’s closing bell.
“There’s still Friday, Monday and Tuesday, so you never know,” said Paul Hickey, co-founder of Bespoke.

The only two times the market sold off in the week before the election was in 1968, when the S&P 500 fell 0.2 percent after Richard Nixon defeated Democrat Hubert Humphrey, Bespoke data shows. The second time was the 1.4 percent sell-off in 1988 when George H.W. Bush beat Michael Dukakis. The best gain in that period was the 6.9 percent jump in the S&P in 2008 when Barack Obama was elected over John McCain.

Some analysts say, however, there could be a relief rally after Election Day — a post-election bounce. But that conventional wisdom does not ring true, according to the market performance for the first week following the last 22 presidential elections.

The S&P 500 averaged a 1 percent decline in those weeks, and when only the last 10 elections are considered, the results are even worse. Going back to Jimmy Carter’s election, seven of the first weeks post-election were negative, with an average 2 percent decline, meaning any rally was short-lived.