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Will a presidential year bail out the economy?

- Alan Lavine and Gail Liberman



Money managers are cautiously optimistic about the stock market in 2008. Expect a sluggish economy.

But how sluggish is subject to disagreement. Some cite recession as a distinct possibility. Many say U.S. stocks will outperform bonds, but not foreign stocks. Plus, investors can't depend on a presidential election year for sizzling stock market gains, this time around.

Jeffrey Hirsch, publisher of the Stock Traders Almanac, Hoboken, N.J., says election years have a positive influence on stocks. Nevertheless, investors have to worry about market declines after the forthcoming 2008 election.

"Priming the pump" by incumbent parties has tended to prop up market gains in election years. Since 1950, the S&P 500 has only had one loss in the last seven months of an election year. Any severe declines or bear markets likely will be staved off until post-election 2008, or the mid-term 2010 election, Hirsch predicts.

"In the last fifty years, election years have ended lower twice in eleven occurrences with an average Dow gain of 9.2 percent," Hirsch said. "Over the same fifty years, fifteen bear markets have occurred. Four (1960, 1968, 1976 and 2000) have commenced in an election year. Just three (1960, 1980, 1984) have ended in election years."

Other tips from the Almanac:

  • The first five months of the stock market are typically better when the incumbent party retains the White House.

  • The public usually tires of political parties after two terms.

  • The stock market tends to bottom two years after a presidential election.

    Please don't bet the ranch on Presidential election statistics. But it's something to keep in mind.

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    Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.


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