Stock Market Fulfilling Jan. ’20 Cycle Peak; Sharp Sell-off into Late-March Projected!
02/27/20 INSIIDE Track: “Stock Market Election Perspective
The next 6 – 9 months are likely to be full of uncertainty, leading to wider swings in equities (10 – 20% sell-offs & rallies, like 40 years ago), precious metals and interest rate futures as traders struggle to remain abreast of current news and its implications.
In order to provide some context for this discussion, it is helpful to look at the stock market and what it has done during the current administration… and compare it to other related time frames. There is a lot of talk about this so it is even more important to drill down to the facts and see what they reveal.
Since longer-term moves are best assessed on a logarithmic basis (percentage moves rather than price moves), the applicable percentages will be used when comparing these recent election cycles.
In order to try and compare apples to apples (as much as is possible when hundreds of other variables are also in the mix), the best comparison to the current cycle (2017 – present) is the first term of the previous three presidents – Barack Obama, George W. Bush and Bill Clinton.
And, since so much comparison is made against the previous president, the period of 2009 – 2011 should be the most salient in this discussion.
The More Things Change…
On Jan. 20, 1993, the DJIA closed at 3242 on the day William Jefferson Clinton was inaugurated.
At the end of 1995, Clinton’s third full year in office, the DJIA closed at 5117 – a gain of 57.8%.
(From Jan. 20, 1997 – when the DJIA closed at 6843 – until the end of 1999, Clinton’s second ‘first three years’, the DJIA gained 68.0%.)
On Jan. 20, 2001, the DJIA closed at 10,578 on the day George W. Bush was inaugurated.
At the end of 2003, Bush’s third full year in office, the DJIA closed at 10,453 – a loss of 1.2%, the result of the dot-com bubble bursting.
(During Bush’s second term, the first three years’ gain was about 27%.)
On Jan. 20, 2009, the DJIA closed at 7949 on the day Barack Obama was inaugurated.
At the end of 2011, Obama’s third full year in office, the DJIA closed at 12,217 – a gain of 53.7%.
(During Obama’s second term, the first three years’ gain was about 27% – very similar to Bush.)
On Jan. 20, 2017, the DJIA closed at 19,827 on the day Donald J. Trump was inaugurated.
At the end of 2019, Trump’s third full year in office, the DJIA closed at 28,538 – a gain of 43.9%. (As of Feb. 27, it is only up about 29% for that term.)
Clinton’s first three years saw a gain of 57.8%.
Obama’s first three years saw a gain of 53.7%.
Trump’s first three years saw a gain of 43.9%.
The more things change, the more they stay the same (or a little bit less).
[Keep in mind – I am not a Democrat, so I have no bias in favor of Clinton or Obama. This is NOT a political discussion, as much as some might try to make it. I am only interested in facts when trying to perform objective and accurate analysis.]
By the end of Clinton’s fourth year, the DJIA had gained 98.9%.
By the end of Obama’s fourth year, the DJIA had gained 64.9%.
If the current administration is to keep pace, and match the gains seen in Obama’s first term, the DJIA would need to close at 32,695 on Dec. 31, 2020 – for a gain of ~64.9%. (That is about a 28% gain needed from the 2/27/20 close.)
Looking at this over the course of an entire presidency, the DJIA experienced a gain of 232.7% from Clinton’s inauguration through the end of 2000 – an avg. annual gain of 29.1% (not compounded).
The DJIA experienced a gain of 148.6% from Obama’s inauguration through the end of 2016 – an avg. annual gain of 18.6% (not compounded).
So far, the DJIA has experienced a gain of 43.9% from Trump’s inauguration through the end of 2019 – an avg. annual gain of 14.6% (not compounded).
Of course, the stock market is NOT an accurate gauge of political success or failure. It is primarily a gauge of economic activity AND expected economic activity. That is why this should not be a political discussion, but merely an equity market one. Otherwise, the facts get grossly misconstrued. Another political/apolitical debate involves currencies…”
Stocks signaling end of multi-year rally as 40-Year Cycle, reinforced by Feb. 7 – 14 ‘Perfect Storm’ of sell signals, corroborated by late-Jan. ’20 ominous ‘4-Shadow Sell Signal’ project a much larger-magnitude sell-off into late-March ‘20. That reinforces ongoing outlook for decisive stock market peak in Jan. 2020 (latest phase of 16-month, 8-month and multi-year cycles – projecting at least a 3 – 6 month peak) – when the best chance for a new ~20% or larger sell-off emerged..
What Would Feb./March ’20 Stock Market Plunge Mean for Rest of 2020?
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.