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Trade the Congressional Effect: How To Profit from Congress's Impact on the Stock Market by Eric T. Singer

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11,832 Data Points Support the Congressional Effect Theory

We saw in Chapter 1 the massive data support for the proposition that Congress affects the market on a daily basis. From 1965 through 2011, there were 11,832 trading days. By comparison, the Super Bowl indicator discussed in a jocular way in Chapter 1 had just 46 data points. On the 7,767 days they were in session, excluding dividends and transaction costs, the annualized price increase in the Standard & Poor's (S&P) 500 Index was 0.72 percent on the days Congress was in session. This works out to an arithmetic average of 0.00286 percent per day during the average of 165 per year that they were in session. The vast bulk of the price return in the S&P 500 Index over this long period of time occurred on days Congress was out of session. During the 4,065 days they were out of session, the annualized return was 16.60 percent or 0.19 percent per average trading day on the average annual 86 days they were out of session. Just for reference during these 47 years, the annualized total return in the S&P 500 Index was 9.27 percent per year.

On a daily basis, from 1965 through 2011, a dollar invested only on in-session days would have compounded just through price action into $1.25 and on out-of-session days would have compounded into $11.91 (see Figure 7.1).

Figure 7.1 Price Gain in S&P 500 Index In-Session Days vs. Out-of-Session Days, 1965–2011.

Source: Congressional Effect Management, LLC

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