The Votes are In: Are We Still in a Bull Market?

I’m writing this on Sunday the 3^rd and it was filmed Monday morning the 4^th, pre-presidential election on the 5^th. Hopefully by the time this hits YouTube on Friday November 8^th, we have an undisputed President elect.  Last week I did a thought piece on potential stock market outcomes if DJT was re-elected. This was not a prediction or endorsement, but I did it given there were so many similarities in interest rates, volatility markets and public media outlets to now and 2016 when DJT was a surprise winner.

As I write this, the data I’m seeing says it’s a very tight race, however the edge seems to be leaning toward VP Harris as the early voter counts in 7 swing states seems to be heavily skewed toward more female voters voting early and voting on social issues over economic ones.  As the data we presented last week showed, the VP had a large polling lead on social issues while DJT had a large lead along economic lines in swing states.  However, this poll did not narrow the dataset to weighing the top issues amongst “swing voters” in “swing states” which will likely determine this election.

First off investors, this is another thought piece not an opinion piece. Just as I was not endorsing DJT last week, neither myself or OHFG is endorsing the VP for President in this weeks video.  What I am going to do is walk through what historically, the data and only the data says is best for your money and investment returns going forward over the next few years.

First off investors, we are in a bull market, and until otherwise proven false, or be us hit by a black swan event, we should continue on this bull market path. The economy is growing between 2-4% in real terms.  Inflation rates have dropped back to between 2-3%.  Historically, this is the definition of Goldilocks in the stock markets, Historically, these are data points achieved in bull markets. Not to hot, or cold, just right.

Historically speaking, with the economy in this range and inflation coming down, it’s very rare for an incumbent President, which its hard to argue that the VP is not 99% affiliated with, not to win re-election.  Likewise, with the stock markets up the last 6 months, and incumbent has never lost re-election.  The VP and DNC might be getting bad polling numbers in swing states based on people’s opinion of the economy, but the economic data is still historically in their favor for the VP to be elected president this week.

Remember, this is a thought piece not an endorsement.  The investment team at OHFG has a fiduciary duty to manage your investment accounts in accordance with your financial plan, not taking into account our own political beliefs. If the VP wins this week, many voters will be disappointed.  However, it does appear that the Senate is likely to swing to the GOP party this week.  If so, while many other voters may be disappointed in this outcome, historically speaking, this has been the make up of DC under the best historical investment returns in stocks for investors.  A DNC President and a GOP Senate. Here is the same table we presented last week with returns under party “sweeping” the Presidency, House, and Senate over the next 2 years

Contrary to most thinking, historically, sweeps have not been disasters for the markets. GOP sweeps have been slightly more favorable than DNC ones.  And over 4 year Presidency’s the best average annual returns have actually come under a DNC President and a GOP controlled Senate.  Here’s the 4-year annual return data as compiled by Fidelity.

No guarantee of course and past performance is no guarantee of future results. But that has been the data over decades.

But Chris, “this time is different”!  Folks, I’ve heard that every year for 6 years at OHFG and ex the covid collapse, it really hasn’t been very different this time.  Yes, the excuses are different after the fact, but the outcomes.  Extraordinarily good.  So many might say then, the best is behind us.  I recall hearing that in October 2022, and then again in October 2023, right near the lows.  History says don’t bet against this market going higher, only because we are up around 20% year to date.  Why?  Because good times usually trend in the economy and the markets.

Strong 1^st half stock returns usually lead to strong finishes. The takeaway from this chart is regardless of who wins the election or won this week, the economy is ok and the  strong rally in equities in the first half usually leads to higher returns in the second half than normal. And yes, nobody wants to hear that the selloff in late July caused by the Japanese yen carry trade unwind was likely the best opportunity to add to longs before year end.  Given how volatility spiked back then, it shouldn’t be that surprising.

Here’s more data on historic stock returns in good first 3 quarters from Charlie Bileio.  He always has great stats. This is data back to the Great Depression showing the best returns and what happened through year end.

It’s very rare to have a down return in the 4^th quarter after a strong first 9 months.  In fact, only 2 out of 19 years have we had returns of over 19% for the first 3 quarters and had a down 4^th quarter, 1943 and 1983.

Investors, regardless of who won last Tuesday, or wins if we are still counting votes at this time.  History says, your money, if invested in the US stock market index S&P500 should be treated very well through at least the inaugural ball in 2025.  We are just now entering the seasonally strongest 3-month period for stocks and historically markets top in December or January months the most often as shown in another great chart from 3Fourteen Research.

Investors, I don’t know who won the elections this week as of this filming, but when I step back and rationally think about the 2 highest likelihood outcomes, while our candidates might not have won, our in-investment dollars, if invested in the US equity markets, are likely to continue to be very well rewarded into late Jan of 2025 at the earliest.

Investors, it’s been a secular bull market since around 2011 and a cyclical bull market since the cyclical October 2022 pivot higher after the 1h2022 bear market.  And it’s still a bull market, until it proves itself it isn’t, regardless of whether your candidate won this week or not.  And investors as Martha Stewart says, at least for investors “That’s a Good thing”. https://www.youtube.com/watch?v=fJdrgkR0GcU

If you are uncomfortable with wider range of possible equity outcomes, the Oak Harvest team has launched a new strategy that retains the ability to go long stocks, short stocks, as well as buy partial hedges and shock absorber for a stock portfolio.  You can Google “OHFGX Oak Harvest” or find information on this new strategy of ours can be found at OakHarvestFunds.com.

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