If history is any indicator, now might be a good time to consider investing in the stock market.
Of course, there is never any guarantee that the past will repeat itself. However, based on the stock market’s performance in the midst of the presidential elections during the past 60 years, now seems to be a good time to put some thought into equities.
The Standard & Poor’s index of 500 stocks has fallen in only three presidential election years since 1952. It fell by three percent in 1960 when John F. Kennedy was elected, by 10 percent when George W. Bush became president and by 38 percent when Barack Obama took over in the midst of the collapse of leading investment banks and the start of the worldwide financial crisis.
The S&P 500 increased in each one of the other dozen election years — seven times by double-digit percentages.
Despite what you may hear from the candidates, there seems to be no direct correlation with the political party of the winner.
It would seem that the increases have at least some relationship to an incumbent president promoting an optimistic outlook for the economy. Nevertheless, ignoring historical trends and setting aside the constant stream of scary economic reports from Europe, the general health of the American economy is not as gloomy as one might expect.
The economy is improving, albeit not as fast as we might prefer.
So how should an investor react? Cautiously. With patience. And only after thorough research that includes a re-evaluation of both long term and short term objectives.
Right now, there are opportunities worth considering among large well-known, international blue chip corporations that pay significant dividends, “dividend aristocrats,” they are sometimes called.
There also may be investment opportunities right under our noses.
One of these is with water. Water-related equities are already up by 6.5 percent this year. As current levels of global water usage are unsustainable, companies providing infrastructure for distribution and efficient use of water are likely to prosper.
Another industry worth consideration is natural gas. Increased natural gas production in the U.S. is creating investment opportunities in a range of industries, including utilities, energy infrastructure and transportation. Pipeline operators, for example, are expected to spend some $250 billion in capital projects over the next 25 years.
And one more: aerospace.
In early July, in its 20-year forecast of the commercial aircraft market, Boeing predicted an increase to 34,000 new aircraft, costing $4.5 trillion. The surge in orders has been supported by accelerated scrapping of older airliners for more fuel-efficient models; and increased purchases by aircraft leasing companies, which are becoming increasingly important as traditional airlines are finding it more difficult to obtain financing.
According to the Aerospace Industries Association, there was a $462 billion order backlog at the end of 2011 for both aircraft and related parts, greater than in either of the previous two years. New orders for aircraft and parts topped $204 billion, also greater than in the previous two years. All in all, those facts suggest a fresh look at the aerospace industry by investors might be a good idea.
Meanwhile, we can all “enjoy” the political bantering by candidates seeking to win points with their views on reinvigorating the economy. And we can feel some comfort in the fact that the winner will likely have little impact on what otherwise may happen in the stock market.
Valerie Dugan is a senior vice president and financial advisor in the Hartford office of Morgan Stanley Smith Barney. Reach her at 860-275-0779.
