Four Elections And A Market Myth Funeral

Once upon a time there was a myth that the equity market can only go up, year after year, with the average annual return according to such esteemed counting institutions as Ibbotson, at 10% or more. Then, we got the November 7, 2000 presidential election, which took place when the S&P was 1432. Fast forward to today, skipping the second and third elections in the interim, and going straight to today's fourth presidential election. The closing S&P today? 1428. We have now had four presidential elections... and a funeral - that of the "stock market always rises" myth. But wait, it gets worse. The numbers above are nominal. When adjusting for the real purchasing power lost in the past 12 years, whose best indicator in a regime in which CPI data is constantly fudged and manipulated, is the price of gold, one can see that 3 presidential elections later, the S&P 500, when priced in gold terms, is now 83% lower. In other words, how is that wealth effect working out for you? And where will the stock market be in another 3 presidential elections in either nominal or real terms? One can only hope that Japan is not prologue...



Since 11/7/2000, the first election of Bush, the S&P 500 is down 0.25%. The USD has lost a remarkable 30% of its purchasing power relative to the world's major currencies (36% Trade-weighted). But it gets better because energy costs (WTI) have risen 65% since then. The Long Bond has gained a remarkable 50% while the clear winners in a Greenspan/Bernanke era has been precious metals - up around 550% since November 2000.

Still - could be worse - could be European stocks which are down 50% since the November 2000 election...

Chart: Bloomberg


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