A Time of Historically High Returns

By John Del Vecchio  |  January 9, 2020

It’s hard to believe that this year is the presidential election. I remember sitting up until 4 A.M. on November 9, 2016, watching the last presidential election unfold. Yet it feels like that was just yesterday…

With such a controversial president undergoing impeachment, the start of the 2020 election season seems rather tame. Hardly anyone watches the Democrat debates. The last debate drew just 6.17 million viewers, the lowest yet. That compares to 18.1 million viewers for the first debate back in June.

The massive decline in viewers is no surprise to me. It’s a total snooze fest. I watched the last one online and caught myself clicking over to the gossip page of the New York Post to keep myself awake.

While the cycle so far has been mostly boring, there could be fireworks down the line.

The election itself could be contested.

Live debates with Donald Trump will be must-see TV.

Not to mention the fireworks we might see in the market as a result.

Take a look at the chart below:

The Election Cycle

Election years historically generate the second highest returns in the four-year cycle at 6.2%.

If you’re bullish, you want Donald Trump to win. A Republican win means those returns are 9.6%. And a repeat of the same party — meaning another four years of Trump — boosts that return to about 13%.

Will this time be different? Possibly.

The markets were up huge last year. It certainly feels like they are ahead of themselves. That’s been the case for years now.

Nothing can keep this market down.

Not impeachment. Not missile strikes. Nothing. Nada.

So, What’s the Plan?

I’m voting for Donald Trump.

It’s okay. Take a deep breath.

I get plenty of hate mail when I let it be known that I’m voting for Trump.

Typically, I tend to lean bearish.

Though in positions where I’m following the trend, I continue to do so.

Right now, the trend is up.

So, those positions stay long.

With fresh capital, I’m building up cash. While historical statistics favor an up year — and possibly a strong year if Trump wins again — the risks are also higher.

The quality of earnings for U.S. companies are a joke.

Revenues are moderating. Profit margins have peaked. Stock buybacks have been a huge driver of stock returns, and they’re slowing.

So, while this market continues to climb a wall of worry and defy gravity, the laws of economics have not been repealed.

We need a healthy correction in 2020. Without it, I wouldn’t add fresh capital to stocks.

Regardless of who does win the race in 2020, I hope we get that correction.

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John Del Vecchio

John Del Vecchio is the author of the bestselling book, Rule of 72: Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio.

As the in-house stock market guru and forensic accountant for Dent Research, John stood on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, and built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around.

John is also the executive editor of our Hidden Fortunes newsletter and our trading service Small Cap All-Stars.

He graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.MORE FROM AUTHOR