There is always an uptick in anxiety and uncertainty during a presidential election year: After all, there's a chance that the person you prefer to be the country's next leader will not win—and that you'll have to put up with four years (at least) with someone you loathe as president.
It's largely because of such uncertainty and tension that something we might call the Election Year Effect takes place. For example, election years generally coincide with increased spending on Halloween (for the sake of escapism), as well as a decrease in home purchases (because of a reluctance to drop big bucks when so much is up in the air). During the especially tense and coarse Trump-Clinton election year of 2016, the campaign's effect on a wide range of issues and industries may be particularly YUUUGE, as Donald Trump might put it.
Here are some surprising ways that election years—and the ugly election year of 2016 in particular—are credited with having an impact.
Retailers are known for spreading the blame around when sales are subpar because, well, they often don't want to tell investors that the executives in charge simply made some bad decisions. This past spring, Macy's said the strength of the American dollar, and the corresponding diminished buying capacity of foreign tourists, was a major factor in flagging store sales. Target pointed to declining interest in Apple devices as a reason why sales have slumped in 2016. Unseasonably warm (or cold) weather is routinely blamed for underwhelming sales of a wide range of goods, including cars, apparel, home improvement supplies, and more.
The latest excuse for poor sales, according to a recent Bloomberg story, is the 2016 election. "To hear retail executives tell it, the battle for the presidency between Republican Donald Trump and Democrat Hillary Clinton is causing Americans to put off buying everything from romance novels at Barnes & Noble and jeans from the Gap to burritos at Yum! Brand Inc.’s Taco Bell," the story explained. The theory is that consumers are so glued to their TV sets keeping up to speed on election news that they don't have the time to hit the mall. Either that or the campaign has left them so depressed, despondent, and stressed that they're not in the mood to go shopping or go out to dinner.
Money spent on candy, costumes, decorations, and other Halloween paraphernalia tends to hit record highs during presidential election years. Why? The need for escapism and connecting with others is greater than usual, consumer psychologist Kit Yarrow explains.
American consumers are expected to spend $8.4 billion on Halloween this year, according to National Retail Federation projections. The forecast calls for the average participant to spend $82.93 on the holiday, up from $74.34 in 2015, and the most ever in the 11 years the survey has been conducted. Perhaps the increase in escapist fun shouldn't come as a surprise given how tense and unpleasant the 2016 presidential campaign has been.
It would seem like there is no stopping Christmas creep, the term describing the relentless expansion of the winter holiday shopping season. The trend, which is pushed by retailers with the hopes of boosting overall sales, is the reason why shoppers are confronted with Christmas sales the moment Halloween is over (if not earlier), and why Christmas store displays and ads pop up around Labor Day (if not earlier).
The 2016 presidential campaign magically appears to have largely caused a delay in Christmas creep. Apparently, most stores aren't bothering to launch huge sales or holiday advertising campaigns until after the election is over. "The way the airwaves are going to be dominated, for basically the next four-and-half or five weeks, it'll be difficult to get messages through on anything other than the election," National Retail Federation CEO and president Matthew Shay explained to AdAge in early October. "In spite of the distraction the election presents, we're optimistic for holiday spending."
Right. Once the nonsensical distraction of voting and democracy and whatnot is over, Americans can focus on truly important matters: buying stuff.
If there's one thing even more surprising than a slowdown in Christmas creep, it's that Americans are watching less professional football. NFL ratings on TV are down sharply in 2016, especially for nationally televised games, and yes, the 2016 election is being blamed as a reason why.
It's not being blamed as the only reason for the downturn, though. Sure, some fans may be tuning into cable news or one of the debates rather than catching an NFL game on TV. But they also could be watching baseball or streaming Netflix, or doing any number of other things because the NFL matchup on TV is a total dud.
Donald Trump's presidential run has benefitted Trump businesses in many ways. Trump's campaign budget, for instance, pays Trump Towers to rent space for the candidate's political headquarters. If Trump manages to become president and sidesteps some obvious conflicts of interest, he could make himself richer still by, say, conducting press conferences in Trump hotels.
Even so, the overall impact of Donald Trump's run at the presidency has hardly been positive for the Trump brand. As of March 2016, foot traffic at Trump businesses was down 17% year over year. And that was long before Trump's poll numbers—particularly among women—tanked amid the recent "locker room talk" controversy and multiple women accused him of sexual assault.
The Trump name was once thought to add value to a brand, but according to a study by the research firm Brand Keys, "Trump" has had a negative connotation since Donald Trump said he was running for president. As a result, a Trump dress shirt that used to sell for $80 can now command only $65. Rooms at the new Trump hotel in Washington, D.C., are supposed to go for $800 or more per night, but to avoid abundant vacancies they're being booked for under $500. "As the Trump brand becomes more toxic," the Wall Street Journal reported, "consumers will be distancing themselves from Trump-branded products as well," Brand Keys founder and president Robert Passikoff said.
What's the impact of an election year on the stock market? Is there any genuine impact, or even a correlation? The data largely indicates that presidential years are actually pretty average, with the S&P 500 up 7% in election years, compared with a 7.5% increase across all years. During election years when a new president must be elected (like 2016), though, the S&P 500 has been down 4%, on average.
However, another analysis, from CNBC, shows that in 19 out of the last 22 election years, the S&P 500 rallied for an impressive average gain of 6.2% between May and October. Yet another analysis indicates that in the vast majority of cases, when the stock market fares well during the three months before the election, the incumbent party (Democrats, in 2016) will win the presidency.
Above all, what investors should probably be rooting for is a clear-cut victory for one of the candidates—combined with the public acceptance and concession by the loser. (This scenario is far from guaranteed given Donald Trump's refusal to say he'd accept the election outcome, win or lose.) Why? Uncertainty generally isn't good for the markets. As the Economist put it, "A winner, any winner, is better than no winner at all," because a "messy, drawn-out legal battle for president" could very well "dampen enthusiasm for stocks." These words were written in 2004, four years after the contested Bush-Gore election of 2000—but a "messy, drawn-out" election in 2016 could wind up spooking the markets bigly, as Trump might say.
Naturally, political ad spending skyrockets during presidential election years. The U.S. election was one reason ad spending has been projected to increase 4.6% globally in 2016. It's been estimated that political ad spending in the U.S. will hit $11.7 billion this year, and as AdAge noted, "around 80% of the money spent in 2015-2016 on political advertising for presidential candidates has been wasted." How so? It was spent on candidates who didn't get their party's nomination like Bernie Sanders and Jeb Bush.
But the 2016 election isn't just stimulating more ad spending for politicians. It's also proved to be a good excuse to launch quirky ads that have nothing to do with politics. Canada's Cape Breton Island has used the fear of a Trump presidency to advertise itself to Americans as a peaceful place to escape—and perhaps even emigrate. More recently, the Excedrin brand was applauded for the clever message it promoted on Twitter leading up to the final debate between Donald Trump and Hillary Clinton. "The possibility of a #DebateHeadache is high. Be prepared with Excedrin," the pain relief brand said.
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"An election year brings with it a natural state of uncertainty," Homes.com reported earlier this year. "After all, at the moment, Americans have no idea who will be leading the country come November, and this can make some buyers extremely wary."
While it's understandable that buyers may be reluctant to make big-ticket purchases during uncertain times, it's less clear the degree to which election years truly have an effect on home purchases in America. Some studies show that the number of home sales dropped only a tiny fraction of a point during election years. Another study, which used data from the California Realtors Association, indicated that home prices rose an average of 4.5% during presidential election years, compared to more robust increases of 6% the year before elections and 5.3% the year after.
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