Following the worst performing month (September) and most volatile month (October), November tends to provide the markets with a respite from anxiety. Not only has November been one of the best performing months — third best for the Dow Jones Index and second best for the S&P 500 — it also tends to be less volatile, only once producing a swing greater than 10%, up or down in the Dow. However, seven of those negative years since 1950 were in presidential election years. In fact, the Dow lost more than 5% in both 2000 and 2008 — the S&P 500 lost 8% and 7.5%, and the Nasdaq Composite lost 22.9% and 10.8% in those years, respectively — which also were years that featured a non-incumbent election.
In 1988, the other relatively recent presidential election year where there was no incumbent running, all three indexes produced negative returns. So, if there is a year to sell into an election, this could be the one. But it is important to note that in both 2000 and 2008 the market was in a well-established bear markets, long before all the leaves began to fall, so if the market isn’t already heading lower, this non-incumbent election trend may not hold.