Now that Donald Trump has been sworn in as the 45th president, lots of folks are speculating about what his policies might mean for the stock market in 2017.
For some, the conventional wisdom is that expected policies on corporate taxes, regulation, and fiscal spending will create a more favorable business climate and lead to strong market gains. Others caution that Trump is a “different kind of president,” so that even comparisons to earlier Republican presidents is of limited value.
Stock Market Performance Under 1st Year Presidents
Here’s where I think looking to history as your guide can be helpful.
More specifically, let’s take a look at how the stock market has generally performed during the first year of a new president. Does it matter if the new president is a Republican or Democrat? What if the White House has changed parties?
A recent story published by CNBC looked at the S&P 500 during the first year of the past 11 presidents through Obama.
- They found that the market went up 61% of the time, with an average year 1 change of +7.6%
- During the first year of Republican presidents beginning their first term, the S&P 500 rose 20% of the time with an average change of -2.7%.
- For the first year of first-term Democrats, the market rose 83% of the time, with an average change of +13.7%.
Keep in mind that many factors contribute to market performance, and that a new president’s policies generally take some time to go into effect, so these numbers are not necessarily an indication of the failure or success of a new president’s policies.
What Is the Outlook for the Stock Market in 2017?
Going a little further than the CNBC report, I think it’s also helpful to look at the first year of a new president after 8 years of a president from the opposite party.
What happens when a Republican takes over after 8 years of a Democrat — or vice versa? This scenario has coincided with a down year for the stock market nearly every time in history.
If you combine this key historical knowledge with the Elliott Wave principle, Hurst Cycle analysis, and other powerful methodologies, you get a much stronger basis for your trading strategy.
Based on my analysis of all of these factors, I am expecting a significant stock market correction at some point this year, possibly starting in February and lasting through mid-year, possibly into the 3rd quarter.
Subscribers to ElliottWavePlus.com will have access to even more insights into current and emerging stock market trends to guide their trading strategy for the rest of 2017.