The Transition Trade

Nice chart (hat tip King David over at thinkinthemoring.com) from Wall Street Journal on the return of the Dow Jones after election day to the inauguration of presidents all the way back to McKinley when the Dow index was created.

Note Herbert Hoover leads the pack.  Like we have said the return on the Dow during the transition is meaningless in terms of predicting future performance.   Hoover had the momentum of the 1920’s and the 262 percent return of Calvin Coolidge’s bull market behind him at the start of his administration.

The Dow continued to rise 19.44 percent from Hoover’s inauguration on March 4, 1929 to September 3, 1929, where it peaked at 381.17.   The Dow then fell 31.62 percent by October 28, 1929, the day before the Black Tuesday crash, when it fell 11.7 percent in one day.  Interestingly, the markets usually give a sign they are not healthy before a big puke happens.

In spite of the Dow’s good performance during the Hoover transition and first 100 days,  the Dow’s total return during Herbert’s Hoover’s reign was the worst of all presidents, down over 80 percent.   Conversely, the Dow’s performance during  FDR and President Obama’s transition were among the worst as the economy at the time were in throes of the two worst crises the nation has faced.   Yet, FDR and Obama’s bull markets ranked among the best of all presidents.

The Dow did not recover the September 3, 1929 high until November 23, 1954.   And, no, folks,  that is not a typo.   It took more than 24 years to recover the 1929 high.

transition-trade_jan23

 

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