The Presidential Stock Market Cycle

This is a well-known, though hardly flawless, stock market political cycle. Basically, the stock market’s best performances take place during the years that immediately precede the years of presidential elections. Its second-best annual gains tend to take place during the years of presidential elections, with the stock
market often peaking shortly after the elections held during those years. The worst years for the stock market have been the years following presidential elections. For example, positive stock market returns were achieved during every pre-election year but one since 1948. The same ratio of success has almost existed for election years (although the year 2000 was a notable failure), but gains during election years have not generally been as great as gains achieved during pre-electio years. Post-election years and midterm years have produced only modest nr returns to stockholders throughout the years. In fact, some portfolio manage] maintain portfolios in equities only during years that are normally favorable for the presidential market cycle; they turn to interest-producing instruments during the remainder of the time.
This is, again, an indicator that has been highly reliable over the long run by one that has been prone to error in certain years. For example, the stock mark, advanced during the first year of President Reagan’s second term in office (198E during the first year of President Bush’s term in office (1989), and again during the first years of President Clinton’s two terms of office (1993 and 1997), but the year after election hangover returned with the election of George W. Bush, whose fir full year in office (2001) was marked by a serious extension of the 2000-2002 be market.