Why the postelection market bump probably means nothing

Michael Nagle | Bloomberg | Getty Images

A trader walks past a campaign sign for U.S. President-elect Donald Trump and U.S. Vice President-elect Mike Pence on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, Nov. 9, 2016.

The market's booming right now, but it may not mean that much in the long run.

Donald Trump's election has given a quick boost to stocks, with the Dow Jones industrial average touching all-time highs. Since markets closed Tuesday, the Dow and the S&P 500 are up about 3 percent — and that's after coming back from the massive Tuesday night drop. Some market observers expect that boom to continue through Inauguration Day on Jan. 20.

Here's the thing, though: Postelection returns are almost always positive. If anything, there's a tendency for the market to overreact prior to Inauguration Day.

Going back to the 1952 election, the median return for the S&P 500 is 3.7 percent between election and inauguration. But in the 50 trading days right after, the market has actually averaged a loss. Even more so, when you consider the first 100 or 150 trading days after the inauguration, there is zero correlation to that November-to-January rise: Literally almost exactly 0.00.

The table above shows exactly what happened in each of the past 16 presidential elections. Notice the tendency to rise before inauguration, but fall afterward, once things settled back to normal.

If you dig further, looking beyond the election as a reason, the numbers suggest this could just be a seasonal move. Using data from 1980 through 2015 crunched by the Kensho analytics tool, you'll find that in those 36 years, the median return for the S&P 500 between Nov. 5 and Jan. 20 is 3.5 percent. That's basically the same as the 3.7 percent we saw in election years.

Of those 36 years, 28 ended up positive, almost exactly the same proportion as the 12 out of 16 we saw in election years. So maybe there is nothing to it at all.

If October marks a seasonal fall in the markets, then a rise in the next few months is only natural.

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.