While 2014 has been a mediocre year for stocks, Kenneth Fisher says he expects things to heat up later in the year thanks in part to the Presidential Election Cycle.
Since 1925, Fisher says, the S&P 500 has risen in 19 of 22 midterm-election-year fourth quarters. And one of the other the times, it was flat. The average gain in the positive fourth quarters has been over 9%, he says.
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“It works, I think, because it doesn’t dawn on folks until then that even if we don’t get more gridlock, we won’t get much less, and markets love it when government is functionally feckless,” Fisher explains. “Behaviorally, most folks hate losses more than they love gains, on average by more than two to one, and midterms tend to strengthen the opposition to the President, so it finally dawns on us there won’t be lots of taking from A to give to B, whether via taxes or regulations.”
In addition, Fisher says the first two quarters of a president’s third year — which will be Q1 and Q2 of next year — “have been positive 86.4% of the time, although with slightly lower average positive returns: 9.1% (first quarter) and 7.2% (second).”
Fisher also offers a handful of stock picks from the tech and pharmaceutical sectors. Among them: Google.
Validea’s Kenneth Fisher-inspired portfolio is up 13.7% annualized since its mid-2003 inception vs. 6.3% for the S&P 500. Check out its holdings here.