4-Year Presidential Election Cycles in the Stock Market – Election Year Seasonality
Based on historical data, it has been observed that the stock market’s performance in the first two years of a U.S. president’s term is likely to be better than its performance in the last two years of a U.S. president’s term.
Stock market performance after elections:
When looking at the historical record of market movements following presidential elections, the following trends can be seen:
- Returns on the stock market tend to be slightly lower in the year following an election, while returns on bonds tend to slightly outperform. It does not appear to matter whether a political party controls the government, but control of the White House must be changed.
- Analysts found that whenever a new party was elected to power, the stock market gained 5% on average.
- When the same president was re-elected or when one party kept control of the White House, returns were slightly higher.
The midterm election year shows that the second year has generally been the weakest in a president’s term (2022 is such a year, 2018 as well – the two last ). That is, up until the 4th quarter which has seen the best performance in the presidential cycle (Equity curve shown below).
We explained the relationship between Presidential Elections and Stock Market Cycles and the specific stock market sectors to watch in election years here >>
https://www.quantifiedstrategies.com/president-election-cycles/