America has spoken. And, to quote President-elect Barack Obama, “…in this election, at this defining moment, change has come to America.” Now I just have to (selfishly) wonder, what that change will look like for Wall Street.
Will Obama be good for Wall Street and penny stock investors? Or would the investing community rather have embraced a more fiscally conservative John McCain? If history is any judge, the U.S. stock markets are likely to perform better in the next months under a President Obama than a President McCain.
In the past 80 years, the presidency has changed parties eight times: four for the Democrats and four for the Republicans. According to the world of statistics, the average gains on the Dow Jones industrial average in the 12 months after the Democrats ascended to the Presidency has been 20%. When Republicans took over the Dow averages a loss of 9%.
Over the last 80 years the Standard & Poor’s 500 index has risen by an average of 9.3% in the opening year of the six first time Democratic presidents who have served in that time, from Roosevelt to Clinton. The index fell by 4.3% in the first year of the six newly elected Republican leaders.
There are a number of reasons for the political see-saw. First, history shows that incumbent parties tend to lose in times of subpar economic and stock market performance – a bad omen for the Republicans and McCain.
At the same time, stock markets faded badly shortly before the election date in years the incumbent party lost. This suggests that weak markets and a weak economy were significant factors motivating voter change – another bad sign for McCain.
Economists believe that first-year stock market performances of new Democratic presidents have benefits because they have tended to outspend their Republican counterparts, stimulating the economy in the process.
When the markets and the economy are already depressed, the odds of a recovery within the next year are pretty good; regardless of who’s in power. This makes the newly elected President look good when the markets turn around in his first year.
“In the past, Democrats came to power over domestic issues, and Republicans won the White House on foreign issues,” noted one editor. While the war in Iraq hasn’t been forgotten, it has been overshadowed by the economic collapse that unfolded over the past several months.
Now that the election is over, penny stock investors can turn their attention to the markets and the economy. And it seems as though that’s what everyone else is doing too. Stocks tumbled Wednesday as investors cashed in on gains from the previous week.
“Everything pretty much occurred as expected, so now we’re kind of moving on to the next thing,” said one financial analyst. And by “the next thing” he’s probably referring to the Labor Department’s October employment report due Friday.
Or, if you’re a penny stock investor (Democrat or Republican) maybe “the next thing” on your horizon is finding an investment that’s waiting to catapult back after the September/October melt down.
Here’s a great penny stock that we profiled not too long ago, and one that seems party neutral. China Sun Group High-Tech Co. (OTC:BB: CSGH, Stock Forum).
In August, CSGH announced that revenue for the fiscal year ended May 30, 2008 jumped 206% to a record $25.29 million. Net income for fiscal 2008 was up 1,031% at a record $6.74 million, or 13 cents per share.
In mid-October, CSGH announced that revenue for the first quarter of fiscal 2009 (ended August 30) increased 194% to $10.98 million. Net income climbed 271% to $2.38 million, or four cents per share.
“With profitability increasing by 271% in the first fiscal quarter, we continue to make great strides in our sales and manufacturing capabilities. We believe we are off to a great start for fiscal 2009,” concluded Wang.
Subsequent to the end of the first quarter, CSGH announced that its wholly-owned subsidiary won two contracts valued at $16.2 million in annual revenue.
Whether you’re Republican, Democrat, or seemingly undecided, penny stock companies like CSGH are well positioned to capitalize on the optimism that will hopefully follow Barack Obama into the White House.
Read more Stockhouse articles by Peter Leeds.