Will your portfolio survive post-elections?
by Makoy Velasco, Certified Securities Representative
It’s elections fever once again and what could be more interesting for stock market investors aside from who will win the Presidential race (and other seats in government) is the possible direction of the market.
We are currently in the Run-Up before the elections and the past data showed that the best time to invest is six months before the elections. From 1992 until recently, PSEi has always been up six months before the elections with an average gain of 15.63% (excluding 2016). However, roughly five months have already passed and we’re down to barely a month. It’s quite hard to come up with a prediction considering that the movement of the PSE index (with just a month to go before the elections) is quite erratic. The illustration below may give a hint.
The PSE index has gone up by more than 21% in the last three months. Prepare for either of these three scenarios: First, the index may continue to rally and breakout above 7,400. Second, the index may continue consolidating within the 7,200 to 7,400 range which it is currently doing right now. Lastly, 7,200 may fail and the index may drop lower and seek a new support (7,000 perhaps?).
Post elections though, it is best to hold on to stocks for a year after elections. In the past four post-elections seasons, average return after the election day is 22.75%.
Past performances though don’t guarantee future results. All data reveal the probability of how things may turn out. The more often it happens, the higher its probability of being repeated and the more predictable it becomes. However, as we all know, there are no guarantees in the market. There is no such thing as 100% predictability.
Don’t forget that the external risks are still there. China continues to struggle, oil keeps on falling again, US may raise interest rates and Europe can’t take a step forward. The global economy is in such a mess right now and whether we like it or not, it will affect us one way or another.
These things mentioned are to keep you informed of what happened before, what’s happening right now and how could it possibly affect our very own PSE and your very own portfolios.