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Pulse Price Report: Markets and the Election Year

With the Republican nomination of Donald Trump and the Democrats choosing Hillary Clinton at their respective conventions in the past two weeks, including a stronger-than-ever push from the Libertarian Gary Johnson, the true presidential election is underway. Political ideology aside, history shows that the rise and fall of the stock market ties itself pretty closely to a presidential election year.

No matter who is president, the first year after an election tends to slow the economy down. Since 1900, stocks have gained an average of 3.4 percent in the first year following an election compared to 9.5 percent in the year before an election. Economists theorize that an incumbent trying to make good on election promises or a new president in the White House learning the ropes keeps investors cautious.

Then there is the false belief that Republican presidents are better for the stock market given their platform of market freedom and deregulation. But since World War II, the stock market posted bigger returns under Democratic presidents than Republican ones.

When it comes to other seats of power in Washington, there is another myth that a divided House and Senate are good for markets. The clash between powers is believed to slow government down, allowing for the market to run free. But, outside of the 2010 and 2012 elections, a divided government shows market returns 10 percent below that of single-party control in the House and Senate.

In looking at the upcoming election and trying to predict an outcome, looking at the stock market can be a pretty good indication.

According to Jim Stack, market historian and publisher of the newsletter Investech Research, the S&P 500 has an 86.4 percent success rate in predicting election outcomes.

If the stock market shows gains in the three months leading up to an election, the incumbent or the incumbent party, in this case the Democrats, won the White House in 12 of 14 contests since 1928. If the stock market slows in the three months before an election, incumbents have lost 7 of 8 times in the same period. So if you want to know who is going to win, turn off the political commentary and keep an eye on the markets starting in August.

 

Crop prices (July 27)

Rio Creek Feed Mill – Algoma

Commodity Price (per bushel) Basis
Corn $2.82 -0.51
New-Crop Corn $2.85 -0.56
Soybeans $9.05 -0.80
New-Crop Soybeans $8.99 -0.75
Wheat (SRW) $3.45 -0.70

 

Fox River Valley Ethanol – Green Bay

Corn $2.90/bushel -0.43
New-Crop Corn $2.95/bushel -0.45

 

Basis: The difference between the local cash price for a commodity and the Chicago cash price (where the Board of Trade sets national futures price).

 

Gas Price Averages

United States: $2.15

United States one year ago: $2.71

Wisconsin: $2.19

Wisconsin one year ago: $2.68

Northern Door: $2.40

Sturgeon Bay: $2.34

 

Other Commodities

Gold: $1,325.00/troy ounce

Silver: $19.89/troy ounce

Oil: $43.01/barrel

 

Sources: aaa.com, agweb.com, gasbuddy.com, cnn.money, Kiplinger, ABC news

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