October 2, 2018

We’re entering the sweetest spot of the four-year election cycle, historically.  Since 1950, the nine-month span encompassing the fourth-quarter of the mid-term election year (that’s October 1 to December 31 in years like this) and the first half of the following year (January to June, 2019, in this case) have averaged a phenomenal 20.4% gain for the Dow Jones Industrials and +21% for the S&P 500.  For the NASDAQ, which began trading in 1971, the average gain in that nine-month period has been a phenomenal +32%.

October in mid-term election years is the top month of the year for all the major indexes – the Dow, S&P 500, NASDAQ Composite, Russell 1000 and Russell 2000, according to The Stock Trader’s Almanac. Since 1950, the Dow Industrials have averaged 3.1% gains in the October of mid-term election years, and the S&P 500 has averaged 3.3% in mid-term election years, with only four down Octobers in 17 cycles:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

This table represents phenomenal consistency. The S&P 500 has risen in each of these nine-month spans (since 1950) from the pre-election October through the following June 30, with 14 of the 17 gains being double-digit, averaging nearly 21%.  The S&P 500 hasn’t declined in the 12 months following a mid-term election since 1946.  I am not saying we will gain 21% this time around. The last time (2014), we only gained 4.6%, partly due to the “law of large numbers,” since the S&P 500 was around 2,000 at that time.

The basic reason for this rise is “hope and change.” A large part of America wants an end to the Trump era, and another large chunk of America wants to “throw the bums out” of Congress – no matter which Party. The election cycle is so potent because the public basically looks forward to political change as a positive, and the market anticipates these positives in advance. Once the mid-term elections are over, the market then looks forward to the Presidential election, just two years away, a tempting “carrot” in front of the lead donkey, always visible but always tantalizingly out of reach in the near but unreachable future.

Mid-term elections are basically a “restraining order” on the current Party in power. Then, we all look toward a new leader helping to erase all past experiences of dashed hopes under all past political saviors.

In the meantime, the next major data point will be Friday’s jobs report. Let me help you understand what you might see next Friday by taking a look at how The New York Times riffed on last month’s jobs report.

The “Tragedy” of Americans Working Second Jobs…Demythologized

When last month’s jobs report came out, reporters had a choice whether to report on the healthy new job totals (+200,000), the unchanged unemployment rate (3.9%) or a statistic open to interpretation, depending on the political bias of the reporter – the rise in the number of people holding multiple jobs.

Naturally, The New York Times chose the latter. Timed to the start of the school year, The New York Times Magazine for September 6 wrote about teachers working two jobs: “The Second Shift: What Teachers are Doing to Pay Their Bills.” It started out with these stark (but selective) examples: “Some teachers devote 60 hours a week to the classroom, then go to work elsewhere. The hours can be long, the labor physical, the pay close to minimum wage. Teachers across the country are now baristas, Amazon warehouse employees, movie-theater managers and fast-food grill cooks.” The article focused on quotes like this from an English teacher (and part-time window washer) from Oklahoma: “There are times when my lower back hurts, my feet hurt, my hands hurt. I have calluses on my hands that I shouldn’t have.”

The Times knows that stories sell better than facts, but the rise in multiple job holders is not as common as the Times might wish to imply. Second jobs aren’t usually taken out of desperation.  Multiple job holders account for just 4.8% of the labor force and that includes the 2.6% who hold a part-time job in addition to a full-time job and another 1.1% who have two or more part-time jobs varying in hours.

As of 2017, according to the Bureau of Labor Statistics, the mean annual wage for a high school teacher in America was $62,860, with the highest average pay being in Alaska ($85,420) and New York (83,360). Some teachers are notoriously underpaid in terms of the affluence of their state (Arizona, Idaho, Kansas and Oklahoma for starters), but presumably they are free to migrate to better-paying neighboring states.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The Bureau of Labor Statistics (BLS) does not report everyone’s reasons for holding multiple jobs every month, but the BLS launches detailed studies at various times. In a 2004 study, 25.6% of those with multiple jobs said that they needed to meet expenses or pay off debt, while 21.3% liked the value added to their life by a second job. Those values included enjoyment, meeting people, gaining skills or building experience to launch a business. The biggest group, 38.1%, just wanted the extra income to save for something special, like a cruise. The other 15% gave no specific reason for working a second job.

USA Today profiled a typical full-timer who also worked part-time for a specific reason for a limited time: A 49-year-old man in Michigan had $37,000 in debt, including credit cards, student and personal loans, so he decided to take a 6-10 pm night shift in addition to his day job until he could pay off his loans. Sure, it was a hardship, but it was the right thing to do after running up large debts. This is not a sign of economic weakness but of moral strength, a man of character honoring his family commitments.

Think of this example when you see the negative media spin on some portion of next Friday’s jobs report.

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. *All content of “Growth Mail” represents the opinion of Gary Alexander*


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