November Charts of Interest: The S&P 500 Returns Under Republican Control
by Charles Rotblut | November 21, 2024
Featured Tickers:
INTU
PANW
Given the outcome of the recent elections, I am starting this month’s charts of interest with a look at how the S&P 500 index has performed during past periods of partisan control. I also show you how consumer sentiment has shifted in reaction to the outcome before moving on to companies with double-digit growth and the cost of Thanksgiving dinner. Let’s get started.
Republican control of both the White House and Congress has historically been good for stocks. Data from Sam Stovall at CFRA Research shows the S&P 500 realizing an annualized return of 12.9% during those periods. The sample size is small though; full Republican control has only happened during eight out of the last 80 years.
Political Affiliation Drives Sentiment Following Elections
Even though nothing in the economy changed immediately after the U.S. elections, consumer sentiment shifted significantly along partisan lines. Republicans became optimistic while the mood among Democrats significantly worsened.
This chart from Axios shows similar trends as seen in many previous Gallup polls. Consumers significantly shift their economic outlooks following the outcome of a presidential election. This shift occurs even though much of what impacts the economy is beyond the control of the sitting president.
Ignore Your Political Views and Buy and Hold Instead
Whether you are happy or unhappy about the outcome of the election, you should not let those views influence your investing decisions. Buying and holding across all administrations leads to the greatest wealth, as this chart from Axios illustrates.
Large Companies Struggle Maintaining Strong Growth
It becomes harder to maintain a high growth rate the larger a company becomes.
Artisan Partners looked at the companies within the MSCI All Country World index—which is composed of large- and mid-cap stocks from around the world—that grew sales by at least 10% in 2018. Only 35 of those 1,055 companies managed to maintain the double-digit growth consistently through 2023.
Changing the universe to current U.S. exchange-traded companies of all sizes that existed in 2018 results in a larger ending universe of 140 companies. When I required those companies to also have current 12-month sales growth of at least 10%, the number dropped to 66 companies.
Here are the current S&P 500 members with sales growth of at least 10% over the past six years. Most of these companies were not in the large-cap index in 2018. I’ve bolded the companies on track for another year of double-digit sales growth below. Notice that there are just four of them.
The most recent fiscal years for Intuit Inc. 
(INTU) and Palo Alto Networks Inc. (PANW) ended in July. This is why their 12-month sales growth is the same as their Year 1 sales growth rate.
U.S. Stock Valuations Are High Relative to Other Countries
“The U.S. is the most expensive it has ever been compared to the rest of the world,” wrote Dan Suzuki of Richard Bernstein Advisors on the Chartered Alternative Investment Analyst (CAIA) Association’s website. U.S. stocks currently trade at a 60% premium relative to foreign stocks based on forward price-earnings (P/E) ratios.
This is a contrarian signal for those who believe in reversion to the mean. Nonetheless, the market can veer away from historical averages for much longer than you have the patience to tolerate.
Thanksgiving Will Be a Little Cheaper This Year
Here’s something you can feast on: The national cost of a Thanksgiving dinner meal will be 5% cheaper this year than last year. The American Farm Bureau Federation’s (AFBF) Thanksgiving dinner survey calculates that “the classic feast” for 10 people will cost $58.08.
“Seven items dropped in price this year, including turkey, sweet potatoes, frozen peas, a vegetable tray of carrots and celery, pumpkin pie mix, pie crusts, and whole milk,” finds the AFBF. “However, the remaining four items—dinner rolls, fresh cranberries, whipping cream and cubed stuffing—rose in price.”
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Uncovering Consistent & Sustainable Growth With the Revised Growth Grade
Through testing, we found evidence that we could build a better grade to help members identify promising growth stocks and the key components that make them so. -
The S&P 500 Outcasts: Picking Up the Dropped Stocks
A starting point for investors. This filter focuses on stocks that are possibly neglected due to their removal from the S&P 500 index over the past year. -
How Financial Statement Data Can Differ Depending on the Provider
Switching from as-reported to standardized data can significantly enhance the quality of stock analysis. Read about the benefits and drawbacks in the November 2024 AAII Journal.
AAII Sentiment Survey
Optimism among individual investors about the short-term outlook for stocks decreased in the latest AAII Sentiment Survey. Meanwhile, neutral sentiment and pessimism increased.
Bullish sentiment, expectations that stock prices will rise over the next six months, decreased 8.6 percentage points to 41.3%. Bullish sentiment is above its historical average of 37.5% for the 54th time in 55 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 3.7 percentage points to 25.5%. Neutral sentiment is below its historical average of 31.5% for the 19th time in 20 weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, increased 4.9 percentage points to 33.2%. Bearish sentiment is above its historical average of 31.0% for the first time in 10 weeks.
The bull-bear spread (bullish minus bearish sentiment) decreased 13.4 percentage points to 8.1%. The bull-bear spread is above its historical average of 6.5% for the 28th time in 29 weeks.
This week’s special question asked AAII members what they think about the Federal Reserve’s decision to cut interest rates by 0.25 percentage points at the start of this month.
Here is how they responded:
- It was the right move: 53.2%
- They should have left rates unchanged: 36.2%
- They should have cut rates by a larger amount: 5.3%
- They should have cut rates by a smaller amount: 0.8%
- Not sure/no opinion: 4.5%
Bullish: 41.3%, down 8.6 points
Neutral: 25.5%, up 3.7 points
Bearish: 33.2%, up 4.9 points
Bullish: 37.5%
Neutral: 31.5%
Bearish: 31.0%
See more Sentiment Survey results.
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October 24, 2024 Analyzing the Metrics of Stocks Advertised on CNBC
Discussion
Barry J from TX posted over 1 year ago:
Charles, there is a flow in this COI edition I plan to use to plan a 5-course TG meal. (1) Hide the wine, (2) pass around copies of your article before TG dinner, (3) let the political and economic bickering ensue, then (4) ask these same people to sit down to eat and (5) pray together about why they are thankful for the blessings America brings them. America is great for many reasons. One is, as Winston Churchill observed, “You can always count on the Americans to do the right thing, after they have exhausted all the other possibilities.” Happy thanksgiving.
Charles M Rotblut from US-0-IL posted over 1 year ago:
Sounds like a great plan Barry. I hope you have a happy Thanksgiving. And maybe the Cowboys will give us fans a win on Thursday. :)
Barry J from TX posted over 1 year ago:
Charles, another Thanksgiving note just popped up. I hope many AAII members are able to use the Gift Link below. It links to an article by Jason Zweig @ intelligentinvestor@wsj.com who published this story in his column today in the 11/22/24 WSJ. The title is ‘I Don’t Know Where to Turn or What to Do.’ His $763,094 Retirement Fund Is in Limbo." It's about what happened to a man named Richard Whitacre who transferred his entire 401(k) into an account offering a ‘guaranteed’ 15.25% return. Now he wonders if he will he ever see his money again. That is very unlikely and he is facing a huge tax bill. Among our many financial blessings AAII members may want to remember to thank their God that they found AAII and they have profited richly from the educational services AAII provides. The expression "there but for the grace of God go I" acknowledges that one's fate is not entirely in our hands, and that another person's bad luck or misfortune could easily be ours too. https://www.wsj.com/finance/investing/i-dont-know-where-to-turn-or-what-to-do-his-763-094-retirement-fund-is-in-limbo-f89ca638?st=KTYWd6&reflink=desktopwebshare_permalink
John L from NJ posted over 1 year ago:
Thanks Barry for the article by Jason Zweig. I pity those who are taken advantage of by slick talking finance folks. Sadly many people believe what they only wish was true (15.25% guaranteed) instead of facing the reality that this return is not possible. There is a real dark side to the investment world. In this case clearly the offered deal is a scam. But there are many lesser transgressions. This Thanksgiving, I am grateful for John Bogle and the very low cost index funds that are the bedrock of my retirement.
Barry from TX posted over 1 year ago:
Charles, Jimmy Johnson is famous for asking, "How 'bout them Cowboys?" So, let's answer that question. If the Dallas Cowboys were a stock being screened using the VMQ or any AAII Premium portfolio program, the Grades would be as follows -- Value Grade F (overpriced at $8.5B), Momentum Grade F (recorded is at 3-7 YTD and 0-4 at Home while being outscored by 24 points per game and 5 losses in a row produces a trailing EPS = consistently missed consensus estimates 7 of 10 times. With 7 games to play, their schedule forward looks Negative @2-5 (forward EPS projected to miss all consensus estimates). The Cowboys have NO path to or through the Playoffs. There are 10 teams the Cowboys cannot beat this year - 2 in the division (PHI, WDC) to get into the payoffs, 4 in the conference (DET, MIN, GB, TSP) to get through the playoffs, and 4 more in the other conference (BUF, PIT, BAL, KC) to beat in the Super Bowl. Their Relative Strength Indicator (RSI) in the Eastern Division @ W1-L3 and the NFC @ W1-L2 projects total performance at W5-L12, a BIG Estimates Misses for an Underperform Grade of F for ALL prior 10 yr/5 yr/3 yr/1 yr/12mo periods (I would add that the NO Super Bowl streak goes back 28 years to 1996 where they LOST). And Quality Grade F (ownership, management, coaching offensive and defensive strategies, planning and use of a very strong FCF is in the bottom 10% of industry, the NFL, with 32 members) for an overall Quality Grade of F. Looking forward, there are at least 8 teams that the Cowboys cannot beat any day soon and every one of them will have to be defeated to get to the playoffs. An overall 5-12 record says they will watch the playoffs at home. Some folks in the know down here say the Cowboys are tanking the season to get the #1 draft pick. Where will the cash come from? Merchandising is still generating 10-gallon hatfulls of FCF and the Cowboys are not for sale. The best benchmark for estimating future Cowboy performance is to take the OVER in the over /under bet and lay the odds on this proposition, "Which event will happen first, the Cowboys win a Super Bowl or the next total eclipse of the sun? It is definitely turkey season in Dallas. Pass the humble pie. I'll have a double helping, please. These days we really need to count our blessings.
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