Best Stocks Before the Election: 2016 vs. 2020

Investors try to prepare their portfolios before the election every four years. Here are the best-performing stocks in October before America votes for the next president.
Author:
Updated:
Original:

The experts compiling presidential polling aren't the only professionals trying to predict who will win the most electoral votes on Election Day 2020.

Investors try their best every four years to align the investments in their portfolios with who they predict will win on Election Day. They don't always get it right, much like the pollsters failed when they predicted Hillary Clinton would beat Donald Trump in 2016.

There are many variables that go into the performance of the stock market when comparing 2016 and 2020. The poor performance in October this year can be contributed to the ongoing coronavirus pandemic that the Trump administration has failed to contain.

Let's take a look back at stock market performance in October, including market action by sector, the top-performing stocks and the worst-performing stocks.

Market Performance by Sector in October 2016

Market Performance, October 2016

Google Finance

Stock SectorPerformance by Percentage Points

Airlines

+5.95%

Auto

-2.29%

Banks

+7.22%

Conglomerate

-5.52%

Consumer Goods

-1.75%

Disney

+0.22%

Drugs

-8.58%

Food

+3.18%

Oil

-0.60%

Retail

-4.48%

Semiconductors

+2.21%

Telecommunications

-3.52%

Technology

+1.88%

Glancing at the stock market movement ahead of the 2016 election, investors were putting their confidence in the banks and airline industry while the pharmaceutical and conglomerate industry declined.

Best Stocks in October 2016

1. Gap  (GPS) - Get Report | Increased by 26.44 Percentage Points

2. Netflix  (NFLX) - Get Report | Increased by 21.67 Percentage Points

3. Dominos Pizza  (DPZ) - Get Report | Increased by 11.65 Percentage Points

4. Goldman Sachs  (GS) - Get Report | Increased by 10.66 Percentage Points

5. American Airlines  (AAL) - Get Report| Increased by 7.69 Percentage Points

Worst Stocks in October 2016

1. Twitter  (TWTR) - Get Report | Decreased by 25.21 Percentage Points

2. Amgen  (AMGN) - Get Report | Decreased by 15.64 Percentage Points

3. Novartis  (NVS) - Get Report | Decreased by 10.09 Percentage Points

4. AT&T  (T) - Get Report | Decreased by 9.76 Percentage Points

5. Eli Lilly  (LLY) - Get Report | Decreased by 9.84 Percentage Points

Investors must not have seen Twitter's most valuable account winning the presidency when the stock plummeted a month before the 2016 election. 

Despite being the best stock in October prior to Election Day 2016, Gap has dropped over 12 percentage points in the four years since Oct. 1, 2016, as of the close of trading Friday.

Market Performance by Sector in October 2020

Market Performance, October 2020

Google Finance

Stock SectorPerformance by Percentage Points

Airlines

-7.48%

Auto

-4.14%

Banks

-2.63%

Conglomerate

+1.83%

Consumer Goods

-2.05%

Disney

-1.44%

Drugs

-9.39%

Food

-4.89%

Oil

-2.78%

Retail

-0.88%

Semiconductors

-1.82%

Telecommunications

-5.22%

Technology

-0.48%

Stocks fell sharply at the end of October 2020 after the coronavirus cases surged across the U.S. ahead of the election. The failure by the Senate and Congress to come to an agreement on a stimulus bill for the struggling U.S. economy also contributed to the market declines.

There weren't many sectors that finished in the green in October.  Conglomerates were the only stocks to finish positive this past October.

Best Stocks in October 2020

1. Ford Motor  (F) - Get Report | Increased by 17.04 percentage points

2. General Motors  (GM) - Get Report | Increased by 14.85 percentage points

3. Twitter  (TWTR) - Get Report | Increased by 12.27 percentage points

4. Gap  (GPS) - Get Report | Increased by 9.96 percentage points

5. Penske Automotive  (PAG) - Get Report | Increased by 8.51 percentage points 

Worst Stocks in October 2020

1. Intel  (INTC) - Get Report | Decreased by 15.56 percentage points

2. Amgen  (AMGN) - Get Report | Decreased by 14.71 percentage points

3. Boeing  (BA) - Get Report | Decreased by 11.66 percentage points

4. American Airlines  (AAL) - Get Report | Decreased by 11.29 percentage points

5. Novartis  (NVS) - Get Report | Decreased by 10.57 percentage points

If you're looking to buy stocks in October before an election, you might want to avoid pharmaceutical companies like Amgen and Novartis, which made the worst stocks in 2016 and 2020.

Gap performed well both Octobers before the last two elections and Twitter turned things around four years later to take the third spot on our list.

If you're looking to make changes to your portfolio based on your prediction for the election, it might be better to take a barbell portfolio approach. If you still need more guidance for the election, Jim Cramer shared his stock winners and losers for this year's election. 

It may take longer than usual to figure out the winner of this year's election, creating more uncertainty and potential chaos. Good luck.

The stocks selected were among major large-cap stocks that became publicly traded companies prior to October 2016.