2016 ROI Fourth Quarter Edition with Q & A HIS Capital Group Edition | Page 6

There’s an interesting pattern in the performance of the S&P 500 during the first year of administrations.
Obama saw a good year. The president before Obama – Bush II – experienced a terrible first year of equity
performance. The administration before Bush II – Clinton – saw a relatively decent positive performance.
Bush I breaks the switching, experiencing the strongest equity market performance of the past 50 years.

THE FED
Next in line in terms of trickiness to predict is Fed
policy. If there’s one thing that’s driven markets to
their all-time highs, it’s the current alcohol-serving
Fed (for those not seeing the pun here – the Fed
is typically referred to as the individual taking the
alcoholic punch away from the party). The sitting
chief administrator of the Federal Reserve – Ms.
Janet Yellen – is perhaps the weakest Fed Governor
ever. During the Obama Administration – i.e. the
president that appointed her – she’s raised the
Federal Funds rate only one time – to a measly 50
basis points.

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HIS Capital Group

Given that a Republican president is on the docket,
we anticipate the rate hiking to take on a more
real sense, with a rate hike for sure happening in
December 2016. We also anticipate that the Federal
Reserve will do what it can to raise rates quicker.
As evidence for this presupposition, consider the
figure on page 4. The Fed sure likes to hike during
Republican administrations. Perhaps there are other
explanations for this observation (like perhaps the
performance of the economy), but it does speak to
those who don’t believe the Fed is straight with its
preferences.