Here's a political tip on the stock market

Posted: Thursday, August 24, 2000

NEW YORK (AP) -- Here we are with a stock market that for many silly reasons threatened the high jump record in 1999 but that now ignores one of the market's best indicators.

That indicator is the market's own past performance during presidential election years. During 25 presidential election years in the past century, the market rose in 19 and fell in only six.

Critics of the presidential-year thesis eagerly point out that a 76 percent report card would rate only a ''C'' in most high schools.

In fact, many a professional seer has already cautioned investors to beware of exaggerated promises they might hear from candidates, reminding them that words aren't always followed by action.

Well, OK, say defenders of the proposition, we will simply stick to the facts:

-- For all election years in the past century the report card is only 63 percent, meaning the market rose in 63 years but fell in 37.

-- During the past 75 non-presidential election years, the market gained in only 44 years, or 58.2 percent of the time.

These statistics come from Gerald Perritt, who holds a doctorate in mathematics and used to teach Chicago-area college students before migrating to Largo, Fla., where he edits the Mutual Fund Letter.

Interpreting the statistics, Perritt informs us that the stock market is about 50 percent more likely to post a gain during a presidential election year than in a non-election year.

That said, the results still might not be as clearly cause and effect as might appear. Especially in recent years, for example, there have been some very good years, even when there was no run for the presidency. The economy, it seems, is really what counts.

Nonetheless, the fact remains that, ''for whatever the reason,'' as Perritt says, presidential election years appear to treat investors more kindly than in other years.

It may be explained by all the promises of a new beginning. It might have something to do with the euphoria created by an attitude that everything is correctible. Why, politics could be the reason.

Perritt points out that Democrats are viewed as big spenders, especially on social programs, while Republicans are considered pro-business. Good times, it might seem, would favor the latter.

The expectations, however, might not be justified.

Ned Davis Research of Venice, Fla., found that under Democratic presidents, the Dow rose an average of 7.3 percent, but that under Republican presidents it gained an average of only 4 percent.

Both these gentlemen probed far deeper into the amazing world of political statistics, uncovering many worthwhile numerical artifacts, but in the end this is what Perritt has to say:

''Although presidential election years tend to be accompanied by better-than-average stock market returns, no one really knows why. It could be just a statistical anomaly.''

Yes, of course, but anomaly or not, just look at the odds.

And remember the earlier words of Perritt: ''The stock market is about 50 percent more likely to post a gain during a presidential election year than during a non-election year.''

End Adv PMs Thursday, Aug. 24

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