Despite all the hand-wringing about markets in the runup to this election, both historical and empirical evidence of what actually happens after a U.S. presidential election signal an improvement, at least over the coming weeks. But whether a November rally will have legs is less clear, said Bob Lang of ExplosiveOptions.net during Tuesday's "Mad Money," Jim Cramer's CNBC show.
Certainly, investors had reasons to be anxious. Institutional investors, mindful of how the Brexit vote caught them off guard, have been unusually spooked by this election campaign. As a result, they've been on the sidelines. Lang also cited the recent crude oil price drop and prospects of a December hike in the Fed funds rate; last December, when the U.S. central bank hiked interest rates the S&P 500 fell 8% in a matter of weeks.
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Still, Lang thinks that by combining big picture and granular perspectives a more nuanced -- and potentially hopeful -- outlook for the markets emerges, at least in the short term.
"When tomorrow comes and the sun rises, nothing will have really changed for anyone, so everyone needs to relax and focus," said Lang, who's also part of the three-man team behind TheStreet.com's Trifecta Stocks newsletter. "In 2008 after [Barack] Obama was elected, we still had a financial crisis to deal with. Nothing really changed. For those predicting the end of the world, that is a bet that has never paid off."
History provides one reason not to panic, he said. Since 1980, in seven of the nine post-election markets, the bulls have prevailed. Specifically, they rose after four elections and fell after five; but three of those five declines were moderate (4% to 7%) and served as a prelude to rallies.
"If history means anything, the odds favor the bulls," Lang said. He also cited insights from Ryan Detrick of LPL Strategies about post-election market patterns.
"Going back to 1952, the S&P 500 has gained from election day until Inauguration Day in 11 out of 16 elections for an average return of 2.5%," he said. "The median return between election and year end is actually 3.2% because the overall average gets dragged down by the huge 19.9% drop during the financial crisis.
The reality is if the economy is on firm footing and not in a recession as it was in 2008 or falling into a recession as it was in 2000, most of the time the returns have been rather strong for the S&P 500, according to Detrick. Considering the economy currently is probably the best economy an incoming president has inherited since Bill Clinton in 1992, this could be another plus for equities after this election.