Tabell’s Market Letter – May 09, 1980

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER New YORK STOCK EXCHANoe, tNC MEMBER AMERICAN STOCK eXCHANGE – May 9, 1980 – … -.. '.!– Our quadrennial exercise-in analysis of the election-year stock market pattern was published somewhat earlier this time around than has normally been the case in the past. Back on November 16, we set forth our usual table detailing the stock market history of each election year since 1900 and duly arrived at the conclusions that this study normally tends to show. One of these conclu- sions pointed out the tendency of such years to have a flat or downward bias in the year's first half, a tendency which will apparently again be the case in 1980. ;;;- We generally couch this study in terms of the average price for each month in an election year, expressed as a percentage of the previous year-end close. In February of this year, the average prices for the Dow and S & P 500, respectively, were 104 and 107 of their year-end closes. The recent decline caused the average price for the Dow in April to be 94 of its yearend figure, and the comparable statistic for the S & P 500 was 95. Some recovery has taken place, but the average price for May so far is below its year-end figure in both instances. As the stock market sorts itself out, the political scene seems to be doing so also. It now appears probable that, despite media-attracting death rattles by the minor candidates and their satraps, Messrs. Carter and Reagan will be the contenders next November. The historical record of third-party candidacies, moreov.er, would suggest that, despite Mr. Anderson's efforts, one of the aforementioned two gentlemen will govern the United States beginning in 1981. We consider ourselves unqualified to comment on political subjects except insofar as they relate to the equity market, but it can be noted that the action of that market so far can be inter- as afforam-g -camp. -'l'nere -nave jeen seven elmrt10n years -1u this century in which the average April price was lower or about the same as that of the previous year-end. Those years were 1916, 1920, 1932, 1940, 1952, 1960, and 1968. In six of the seven cases, as was the case this year, the decline was modest, under 10, the only large drop being in 1932. What is interesting about the seven years, however, is that ,five of them saw the replacement of the incumbent Presidential party, Wilson by Harding in 1920, Hoover by Roosevelt in 1932, Truman by Eisenhower in 1952, Eisenhower by Kennedy in 1960, and Johnson by Nixon in 1968. The two exceptions were the reelections of Wilson in 1916 and Roosevelt in 1940. Conversely, of the seven occasions during the century when the party controlling the White House changed, five saw flat-to–lower stock markets in April. The two exceptions to this rule were the replacement of Taft by Wilson in 1912, and notably, the replacement of Ford by Carter four years ago, an interesting exception to the election-year pattern since it produced the strongest four-month rally of any of the 20 years under study. As far as the stock market is concerned, the most relevant conclusion of our election-year study at the moment points to the tendency toward a strong second half for the year, regardless of who winds up getting elected. As we pointed out last November, in 16 of the 20 election years, the .average price for December was higher than tlTe average price for June. Likewise, the Decem- ber average price was higher or the same as the April average price in 15 years of the 20. In five of the seven years in which the market was lower in April, it had recovered significantly from those lows by the year end. The only two cases where the market continued down from its -r April low figure were 1920 and 1940. –'-0' This letter, as its readers know, has been inclined toward the view that recent market action constitutes a base formation attempt which could, of course, result in a rally to take place later this summer. Such a pattern appears consistent with a year in which a presidential election is taking place. Dow-Jones Industrials (12 00 PM) S & P Composite (12 00 PM) Cumulative Index (5/8/80) 809.90 105.40 771. 78 ANTHONY W. TAB ELL DELAFIELD, HARVEY, TAB ELL AWT sla No statement or expressIOn of oplnlon or any other motler herein contamed 15, or IS to be deemed 10 be, directly or Indirectly, on offer or the soliCltallon of on offer to buy or sell any security referred to or menlloned The mOiler IS presented merely for the convef'lenCe of the subSCriber While 'lie believe the sources of our Informe- han to be reliable, we ,n no way represent or guarantee the occuracy thereof nor of the statements mude herein Any oct Ion to be token by the subscriber should be based on 1'115 own investigation and Informallon Janney Montgomery Seolt, Inc, as 0 corporation, and Its officers or employees, moy now have, or may loter lake, positions or trades In respect to any rrenlloned In thiS or any future Issue, and such posdlon may be different from any views nov. or hereafter expressed In thiS or ony other Issue Janney Montgomery Scott, Inc, which IS registered With the SEC as on Investment adVisor, may give adVice to Its Investment adVisory and othel customers independently of any stotements mode In thiS or In any other Issue Further Information on any security mentioned herein IS ovailable on request