Monthly Archives: April 2016

Presidential Election Cycles and the Market


You may feel strongly about the Republicans or the Democrats when it comes to your politics, but when it comes to your portfolio, it doesn’t really matter much which party wins the White House. Conventional wisdom might suggest that Republicans, who are supposedly more business-friendly than the Democrats, would be more beneficial for your stock holdings. In fact, looking back to 1900, Democrats have been slightly better for stocks, with the Dow up an average of nearly 9% annually when the Democrats are in control, compared with nearly 6% per year during Republican administrations. Once you factor in normal variation in stock market returns, there’s no difference between Republican and Democratic administrations from a stock market perspective. *Source: BlackRock

Crystal Ball

If the election results cannot predict stock market returns, can the stock market predict who will be in the White House for the next four years?  If the stock market (S&P 500) is up in the three months leading up to the election, put your money on the incumbent party. Losses over those three months tend to usher in a new party.

The statistics are compelling. Since 1928 there have been 22 presidential elections. Fourteen of those elections were preceded by gains in the three months prior to the election and eight were preceded by losses in the three months prior to the election. In 12 of those 14 instances where there were gains, the incumbent (or the incumbent party) won the White House.  In 7 of those 8 instances where there were losses, incumbents were sent packing. Exceptions to this correlation occurred in 1956, 1968 and 1980. According to these statistics, the S&P 500 has an 86.4% success rate in forecasting the election. Here comes the disclosure: “Past election results predicted by the S&P 500 do not guarantee future elections results”; more so than ever in this 2016 presidential race. *Source: Chicago Tribune

With that being said, here are some patterns that have emerged over the years:

Year of the Presidential Cycle

The average annual gain for the S&P 500 Average has varied depending on the year of the presidential cycle. (1926-2010)

Year 1: +8.1%

Year 2: +8.9%

Year 3: +19.3%

Year 4: +10.9%

1st year of a President’s term:

S&P 500 is positive 52% of the time

S&P 500 is negative 48% of the time

2nd year of a President’s term:

S&P 500 is positive 64% of the time

S&P 500 is negative 36% of the time

3rd year of a President’s term:

S&P 500 is positive 90% of the time

S&P 500 is negative 10% of the time

4th year of a President’s term:

S&P 500 is positive 81% of the time

S&P 500 is negative 19% of the time

*Source: Federated Investor

Election Years are Generally Positive Ones – Since 1928, the market (S&P 500) has only been down four times in an election year:

1932 (Roosevelt v. Hoover): -8.2%

1940 (Roosevelt v. Willkie): -9.8%

2000 (Bush v. Gore): -9.1%

2008 (Obama v. McCain): -37%. (2)

As of April 21, 2016, the S&P 500 is up 2.29%. (4)

That means the market has only been down in 4 of 22 election years since 1928, or less than 20% of the time. *Source: Federated Investor

I’ll leave you with some cocktail party fun facts about our U.S. Presidential Elections:

  • Victoria Woodhull became the first woman to run for President in 1872.
  • James Buchanan is the only bachelor to be elected president.
  • Ronald Reagan is the only divorced man to be elected president.
  • Martin Van Buren was the first natural-born American to become president in 1837. Each of the seven previous presidents were born as British subjects.

(1)BlackRock (Page 3)

(2)Federated Investor


(4)CNN Money


– The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.


Aging in Place: Does it Make Financial Sense?

Modified Bedroom – Aging in Place Example

More than 90 percent of older adults prefer to age in place rather than move to senior housing, per the National Aging in Place Council (NAIPC).

The number isn’t surprising; no one wants to let go of familiar surroundings. But what exactly is aging in place, and does it help or hurt you financially?

What is Aging in Place?

Simply put, aging in place means you make modifications to your current home, so it is safer and more accessible as you age. Some of the more common modifications are widening doorways, installing grab bars, no-step entrances, non-slip flooring, and adjusting the heights of everyday features like toilets and shelving. Aging in place makes it more possible for you to live where you are most comfortable, even as your health changes over time.

Is Aging in Place Financially Responsible?

Any time you make modifications to your home, it is going to cost you money. The amount will depend on how many and what type of changes you make. Some people decide to downsize their home rather than adapt it, which can help you avoid the cost of modifications as well as maintaining your current home.

Of course, there are many factors that go into selling a home and buying a new one. Can you sell your home for the right price? Will you need to spend money to update your current home before you sell it? What kind of loan will you need for a new home? You have to consider all angles before deciding if aging in place is right for you.

Another consideration is senior housing. While the costs to live in senior communities can be high, you will need to look at whether it makes more financial sense to live there or spend the money to modify your home instead.

If you are close to retirement, then you may want to factor in the costs of aging in place with your retirement budget. If you are already retired but are considering modifications to your current home, it can be helpful to speak with your financial advisor about how it affects your overall plans.

Which types of credit checks affect my credit score?

Checking on House – Types of Credit Checks

We know that big milestones don’t always happen in a silo. Sometimes you are buying a new home and, at the same time, you need to replace your old car. We don’t always have control over when we make significant purchases or decisions. But if you’re like many of our clients, you are also wondering if these are going to impact your credit score.

Let’s take a look at the different types of credit checks and their affects on your score.

Hard Inquiries vs. Soft Inquiries

Any time a third party views your credit report, it is either classified as a hard inquiry or a soft inquiry. How do you know the difference between these two types of credit checks? Hard inquiries usually require your authorization, but soft inquiries do not. Hard inquiries can lower your credit score by a few points, and they may stay on your report for a few years. Soft inquiries do not affect your credit score, but can be recorded on your report if the credit bureau decides to do so.

Some examples of hard inquiries include:

  •      Loans: Personal, business, student, or auto
  •      Credit card applications
  •      Mortgage applications

Some examples of soft inquiries include:

  •      Checking your own credit score
  •      Pre-approvals for credit card offers
  •      Employer background checks

Other Types of Credit Checks

There are additional inquiries that may fall under the hard or soft inquiry category, which can happen if you:

  •      Apply to rent an apartment
  •      Open a bank account
  •      Request a cable, internet or cell phone account
  •      Rent a car

When you understand how various credit checks can affect your score, you can put a stronger financial strategy in place. You can try planning future purchases with these stipulations in mind and have a better experience when you need to make changes.

Check out our 5 Tips to Improve Your Credit Score for some helpful information.

3 Financially-savvy Uses for Your Income Tax Refund

Couple with Credit Card – Pay Off with Tax Refund

What could you do with a refund from your income taxes?

Getting an income tax refund is a great opportunity to make an impact on your financial situation. But where is a good place to spend or, better yet, invest those dollars?

We offer three ways you may want to use your refund to advance your financial plans.

Turn a Tax Refund into Debt Relief

If you have lingering high-interest debt, such as credit cards, then you might consider using your income tax refund to reduce the amount. Not only can you pay off a huge chunk of debt at once, but you can also avoid further interest on that amount when you do so.

Paying off a large portion of your debt – or paying it off altogether – also helps you feel like you are making more financial progress than if you were to make several smaller payments. You not only get financial benefits here, but psychological ones, too.

Create an Emergency Fund

Having enough liquid assets for emergencies is important, no matter who you are. If you lose your job or need to repair your vehicle, for example, an emergency fund provides the extra monetary cushion you need to get through the situation.

If you do not already have an emergency fund, then your tax refund is the perfect way to start one. Drop it in a savings account and continue to build it up over time. How much should you consider putting aside? Three to six months of living expenses can be a good rule of thumb.

Invest Your Income Tax Refund

If you do not have the burden of high-interest debt and you already have an emergency fund, then you may want to consider putting your refund back into an investment account. Depending on the average rate of return, you may be able to grow your money over time and have it available in much larger amounts for retirement or other important milestones.

What is the best way for you to use your refund?

If you want to make sure you are putting your income tax refund in the right place, feel free to reach out to our financial advisors at (847)330-9911. We are here to help you.


– The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing involves risk including loss of principal.