The Presidential Market Cycle
History suggests the stock market follows a predictable rhythm aligned with the 4-year US presidential term. From the "Midterm Bottom" to the pre-election surge, understanding these patterns is crucial for contextualizing market volatility.
Historically the best year for equities as incumbents pump the economy.
Midterm years often see significant corrections before a Q4 rally.
Frequency of positive returns in election years (Year 4) since 1928.
The 4-Year Breakdown
Not all years are created equal. The cycle theory suggests that presidents tackle difficult policies early in their term (causing market drag) and stimulate the economy later to ensure re-election. Click the tabs below to explore the distinct personality of each year in the cycle.
Average S&P 500 Return
+6.5%Cumulative Cycle Impact
If you invested $10,000 at the start of a presidential inauguration, how would the growth curve look?
The chart illustrates the "midterm dip." Notice how the curve often flattens or dips around month 18-22 (Midterms), before accelerating sharply in the second half of the term. This is often attributed to the resolution of political uncertainty.
KEY INSIGHT
The back half of the presidential term (Years 3 & 4) has historically produced nearly 75% of the total 4-year cycle gains.
Does the Party Matter?
A common misconception is that one party is inherently better for the market. While there are variances, the market has historically trended upward under both parties. However, gridlock (split Congress) often performs best as it prevents radical policy shifts.
Avg Annual Return by President Party
Unified Government
~10.5% Avg Annual Return
Split Congress (Gridlock)
~13.2% Avg Annual Return
The Election Year Microscope
Year 4 (The Election Year) has a unique seasonal profile. Unlike typical years where "Sell in May" is common wisdom, election years often see a summer rally followed by pre-election jitters in September/October.
Primaries (Q1)
Market consolidates as candidates are defined.
Summer Rally (Q2-Q3)
Conventions usually provide a clarity bump.
Post-Election (Nov-Dec)
Once the winner is known, uncertainty vanishes, often triggering a rally.