Prediction: 6-19% Yield in DJIA Stocks in 2013

Pamela is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The primary goal of the DJIA is to provide people with a clear view of trends in the U.S. stock market.  So what can we anticipate this year, if anything, with DJIA (Dow Jones Industrial Average) stocks? 

If you have been following the stock market for a while, you may have already concluded that the historical data is typically not very revealing.  Let’s see if the DJIA data concurs with this. 

For the first year of a presidency, data from 1900 to 2011 shows a 6% increase in the DJIA when compared with the previous year, on average.  That includes years with negative and positive increases, with the lowest being -33% in 1937 and the highest being +67% just four years earlier (1933). 

Presidential Party In Office

Average DJIA Change when Compared with the Previous Year (Data for the Years

1900 - 2011) for the First Year of a

4 Year Presidential Term

Democrats

7.19%

Republicans

5.09%

Overall

6.03%

 

If we only look at whether the first year of a presidency, as compared to the previous year, had an increase or decrease, we find that there were increases 50% of the time.  So basically you could say you could flip a coin and have a 50% chance of an increase. 

That being said, the odds may be slightly higher with President Obama being Democrat, as the data reveals there is a 62% chance of a positive DJIA.  

 

Presidential Party In Office

Percentage of Years with a Positive DJIA when Compared with the Previous Year (Data for the Years

1900 - 2011)

Democrats

61.54%

Republicans

42.86%

Overall

50.00%

   

 

While the information I have presented so far is not that significant, I did find some interesting information from the data for the past two decades.  For this two decade time period, Democrats were in office three of five times and all of those three times yielded a positive DJIA for the first year of a presidential term (14%, 23%, and 19%).  The two times Republicans were in office over the past two decades yielded a negative DJIA for the first year of a presidency (-7% and -1%).  That yields a 9% average overall, or a 19% average with Democrats and a -4% average with Republicans.

As you may know, the DJIA is composed of 30 stocks, all of which are major players in their corresponding industries. 

The 30 DJIA Components

Ticker

Organization

 

Ticker

Organization

 

Ticker

Organization

MMM

3M Co.

 

DD

E.I. DuPont de Nemours & Co.

 

MRK

Merck & Co. Inc.

AA

Alcoa Inc.

 

XOM

Exxon Mobil

 

MSFT

Microsoft Corp.

AXP

American Express Co.

 

GE

General Electric Co.

 

PFE

Pfizer Inc.

T

AT&T

 

HPQ

Hewlett-Packard

 

PG

Procter & Gamble Co.

BAC

Bank of America

 

HD

Home Depot Inc.

 

TRV

Travelers Cos.

BA

Boeing Co.

 

INTC

Intel Corp.

 

UTX

United Technologies Corp.

CAT

Caterpillar Inc.

 

IBM

International Business Machines Corp.

 

UNH

UnitedHealth Group Inc.

CVX

Chevron

 

JNJ

Johnson & Johnson

 

VZ

Verizon Communications

CSCO

Cisco Systems Inc.

 

JPM

JPMorgan Chase

 

WMT

Wal-Mart Stores Inc.

KO

Coca-Cola Co.

 

MCD

McDonald's Corp.

 

DIS

Walt Disney Co.

 

Headlines abound for the individual DJIA components, with some news looking good and some looking bad. 

Of the bad, Hewlett-Packard (NYSE: HPQ) shares have been shook up in terms of a Justice Department investigation in relation to their disastrous acquisition of Autonomy Corp.  Autonomy Corp. appears to have misrepresented their performance prior to HPQ’s purchase.

Home Depot Inc. (NYSE: HD), who’s busiest time of the year is in the spring, and Wal-Mart (NYSE: WMT), are facing a dockworkers strike where port closings, with approximately 15,000 workers possibly walking off the job, can cut off shipments. 

Of the good, the Federal Trade Commission recently approved the Disney (NYSE: DIS) acquisition of Lucasfilm and the Star Wars franchise for $4 billion.  The acquisition took place at the end of December.  With at least one, and possibly two, new Star Wars films coming out in the next few years, part of a new trilogy, this is believed to be a good purchase for Disney.  In addition, Disney increased their annual cash dividend by 25%.

General Electric Company’s (NYSE: GE) Investing Unit is purchasing 32 currently operating wind farms in France, with a combined 321.4 megawatts.  They are also promoting their new GE Evolution Series locomotives, the most fuel-efficient and cleanest freight locomotives they have made.  They state that particulate emissions and oxides of nitrogen emissions are slashed by 70 and 76 percent, respectively, with this new locomotive when compared to current production engines. These new locomotives should save rail customers billions, without giving up performance.

As for Coca Cola (NYSE: KO), they have recently partnered with Select Milk Producers, Inc. to Create Fair Oaks Farms Brands, LLC.  This is expected to diversify their portfolio and increase their growth in the area of dairy.

While ups and downs are expected this year for the individual 30 DJIA components, the historical data does reveal that an increase in the DJIA average for this year between 6% (the overall 110 year average) and 19% (the past 20 year democrat average) is definitely a possibility. Hence, if you had shares in all of the DJIA components, you could see positive gains this year if the predictions are realized. While I cannot make any guarantees, I do believe the DJIA components are strong long term investments that provide consistent growth; in addition, many also provide dividends. 

I would also like to add that I do realize that there is so much more to my data then what party is president, such as who controls the house, who controls the senate, if there is a war going on, etc., etc.  I am completely aware of this.  I am just working with the data available on the DJIA website. Since they don’t have any other information there on this, I am presenting information about the data I have.  However, if you would like me to delve deeper into this area, feel free to let me know about some funding opportunities for a project like that, as I’d happily do it, because I love analyzing numbers.   


The Fool blogger owns shares in DIS and KO.

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