4th year of the Presidential cycle, plus 2k subs !!

The Sandbox Daily (12.19.2023)

Welcome, Sandbox friends.

Today’s Daily discusses:

• Presidential cycle: 4th year progression

Let’s dig in.

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Markets in review

EQUITIES: Dow -1.27% | S&P 500 -1.47% | Nasdaq 100 -1.53% | Russell 2000 -1.89%

FIXED INCOME: Barclays Agg Bond +0.37% | High Yield +0.01% | 2yr UST  4.346% | 10yr UST  3.855%

COMMODITIES: Brent Crude -0.09% to $79.16/barrel. Gold -0.38% to $2,044.3/oz.

BITCOIN: +2.95% to $43,604

US DOLLAR INDEX: +0.28% to 102.454

CBOE EQUITY PUT/CALL RATIO: 0.61

VIX: +9.10% to 13.67

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Quote of the day

“It is better to fail in originality than to succeed in imitation.”

- Herman Melville

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Quick publisher’s note

Today we crossed the 2,000 subscriber mark !!!

I hope you enjoy reading The Sandbox Daily as much as I enjoy formulating market analyses and charts. Putting my thoughts down on paper and committing to the research process – aka “doing the work” – has not only been incredibly rewarding to my own investment framework as a professional portfolio manager (formerly at UBS but now as an independent RIA), but it also allows me to share institutional grade research and my own humble opinion on what’s moving markets… in real time. Sometimes they’re good takes, sometimes they fall flat – but we’re always sharpening the pencil and looking for that edge.

It’s also allowed me to meet some of my heroes, countless peers, prominent financial bloggers, market strategists from major institutions, and somehow even landed me on television and podcasts. So, the doors that have opened because of your support is simply incredible.

Just a little over a year ago, we started with ~10 subscribers. Now, we have subs from countries all over the world, moms and pops, seasoned vets to new investors, and plenty of industry folks. I am truly grateful to each and every one of you. I appreciate the feedback, comments, and most importantly, the engagement directly on the e-mails and Substack platform – it sure helps the algo for our small but budding newsletter. I’d especially like to call out my friend, Sam Ro, for being an inspiration and huge supporter of The Daily.

This is a busy world and your time matters. We are so grateful you choose to spend a few minutes each day here with us. Thank you, thank you, thank you.

3,000, you’re up next.

Onward…

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Presidential cycle: 4th year progression

With ~3.5 weeks until the Iowa caucus and 5 weeks until the New Hampshire primary, the race to the 2024 U.S. national election is picking up steam – with the campaign season kicking into high gear in January.

On the Democratic side, incumbent President Biden is running for re-election, so the spotlight shifts to the Republican party and which candidate becomes the leading challenger.

Currently, former President Trump has a commanding lead in the national polls, but we will learn the reality of his support as the race unfolds over the coming months. One way or another, the race will probably be effectively over by the middle of March based on delegate support.

Rest assured, the economy will be a major hot button topic during the campaign.

In terms of market expectations for 2024, the historical annual progression of the 4th year in a presidential cycle suggests a likely consolidation during the 1st half of 2024, before an acceleration in the back half of next year.

Historically, annual S&P 500 index returns have averaged +7.5% with a yearly maximum average drawdown of -15.0% during the 4th year of a Presidential cycle – both in line with long-term historical averages.

Below is a chart showing calendar year returns for the S&P 500 during all election years.

A red box represents all U.S. Presidential Election years since 1928; a yellow box shows all U.S. Presidential Elections years that occurred simultaneously during a U.S. recession.

The S&P 500 has been lower only four times during an election year, with two instances during a recession.

Diving deeper into the monthly seasonality trends with an election year shows that June through August have been strong historically, especially under Democrat leadership, while the months leading into the election (September to November) have been weaker.

Source: Piper Sandler

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That’s all for today.

Blake

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Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle.  We are committed to delivering high-quality and timely content to help investors make sense of capital markets.

Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.