Page 41 - Ekonomija i Biznis_noemvri 2016.indd

РУБРИКА

photo: (https://si.wsj.net)

regardless of how perfectly correlated relation-
ship exists between the election cycles and the be-
havior of the capital market, still this should not
dictate the investment strategies. every invest-
ment decision should be based on the fundamental
of investment as understanding and treatment of
the risk, the diversification and the market cycle

consideration that the bull market is typ- data about the movement of the prices
ical for a growing economy which rests of shares measured through the leading
on well set and accepted policies and indices show that the index S & P 500 has
measures. Out of 22 cycles of presiden- 86.4 % rate of success in the prediction
tial elections in America from 1928, in 14 of the outcome of the election process in
of them, the prices of shares in the stock America.
exchange increased in the past 3 months
before the date when the elections were In the end, regardless of how perfectly
held. In 12 of these 14 election cycles, the correlated relationship exists between
current president (or the current ruling the election cycles and the behavior of
political option) was reelected. In 7 of the capital market, still this should not
8 elections where in the last 3 months dictate the investment strategies. The
from the date when the elections were models in the relationship are often ob-
held, the shares were decreasing, there served without direct causal relationship
was also a change of the current politi- and therefore every investment decision
cal option. Exceptions from these indi- should be based on the fundamental of
cators and from this rule are the years investment as understanding and treat-
of 1956, 1968 and 1980. The statistical ment of the risk, the diversification and
the market cycle.

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