Presidential Cycle

Presidential Cycle

Postby winston » Fri Dec 17, 2010 9:17 am

Get Ready For A Turbo Charged January Effect by Mebane Faber

Two such anomalies are setting up for a favorable year end and start to 2011.

The first is what is known as the Presidential Cycle.

This theory goes that equity returns during the third and fourth years of a President’s term are more favorable than the first two years. The fundamental justification is that the President tries to force any difficult legislation into law during the first two years of his presidency.

Historically the President’s political party loses power in the midterm elections (as we saw this past November). After the first two years, the task of re-election takes hold and the President is consumed with securing a second term of office or campaigning for his party’s potential replacement.

The historical data support this theory—there are even studies that go back to the early 1800s (although data are a bit spotty pre-1900). Median returns have been 5% in Year 1, 5% in Year 2, 22% in Year 3 and 11% in Year 4 since 1927.

Since World War II the S&P 500 has not had a down Year 3 at all with gains averaging 18% per annum.

The fourth quarter of Year 2 (the one we are in now ending December 31, 2010) is the best performing quarter followed by first quarter and second quarter of Year 3 (January –June 2011).


http://blogs.forbes.com/investor/2010/1 ... hares-spy/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118528
Joined: Wed May 07, 2008 9:28 am

Re: Presidential Cycle

Postby winston » Sun Dec 26, 2010 8:14 pm

Will The Bulls Keep Running? By Prieur du Plessis

Historically, the third year for a president produces a good return for investors.

Investment strategists Liz Ann Sonders, Chief Investment Strategist of Charles Schwab, and Sam Stovall, Chief Investment Strategist of Standard & Poor’s, say why 2011 will be no different.

http://www.dailymarkets.com/stock/2010/ ... p-running/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118528
Joined: Wed May 07, 2008 9:28 am

Re: Presidential Cycle

Postby winston » Wed Dec 29, 2010 5:42 am

One Reason To Bet On U.S. Stocks In 2011 By Nilus Mattive

There are definitely plenty of reasons to be concerned about the U.S. economy — and the broad market — in the year ahead.

But as I prepare my strategy for the coming year, there’s an area that clearly argues for being bullish on stocks in 2011 … and it’s probably not one you’d expect …

I’m talking about the political climate in Washington!

As I told my Income Superstars subscribers last month …

The Presidential Cycles Argue for Strong Gains from U.S. Shares in 2011!

I’ve written about the so-called “Presidential Cycles” before, which I follow closely.

But just as a refresher: I keep a spreadsheet of S&P 500 market data that goes all the way back to 1928, and it’s organized in a way that allows me to see how various political climates affected market returns over most of the 20th Century.

So what does this data say about the stock market under different presidencies?

In short, next year should prove to be a very good one!

The third year of a president’s term is typically the strongest — producing an average annual gain of 14.12 percent for the S&P 500. And under Democratic leadership, that number moves even higher to an average gain of 17.7 percent!

Take a look …

Why is the third year so magical? Probably because investors have had a chance to thoroughly digest the new administration’s policies. Moreover, many of those policy changes have had plenty of time to get implemented.

In contrast, the first year of a president’s term — which is full of uncertainty — is usually the worst, producing an average gain of just 3.1 percent!

Other studies support this notion, especially when the focus narrows to a first-term president’s third year. Since 1945, the Dow Jones Industrial Average has gained an average of 19 percent in such cases compared with just 7.9 percent for all years over that period. The data also points to better overall gains for the third year of a first-term president than for the second-term president.

Of course, mid-term elections have also ended by the beginning of the third year, removing yet another cloud of uncertainty. Which brings me to November’s results, and how they might play into things …

While Gridlock Typically Tempers Stock Market Gains, It Also Argues for Lower Interest Rates …

There have been five times in the past eight decades when a president controlled both houses of Congress and then lost at least one of them. However, it’s hard to discern a real trend since the stock market’s historical reaction ranged from massive gains to big losses.

What I can say with more certainty is that a divided Congress has not been mildly positive for stocks at best.

I say that because the S&P 500 has risen an average of 4 percent under Congressional gridlock … twice that much when the divide was only between Congress and the White House … and nearly three times as fast when one party ruled the whole roost!

Meanwhile, based on data from the last 50 years, 10-year Treasury prices have typically risen more when Republicans have controlled at least one house of Congress.

In other words, all other things being equal, we should expect interest rates to drop further in the coming year.

Obviously, this cycle has been anything but normal, and anything can happen next. But at the very least, history gives us one reason to remain positive on dividend stocks in 2011.

http://www.dailymarkets.com/stock/2010/ ... s-in-2011/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118528
Joined: Wed May 07, 2008 9:28 am

Re: Presidential Cycle

Postby winston » Sun Jan 02, 2011 7:23 am

Will Presidential Cycle Preside Over 2011? By Prieur du Plessis

The graph below, courtesy of Chart of the Day, illustrates how the stock market has performed during the average pre-election year.

“Since 1900, the stock market has tended to outperform during the first six to seven months of the average pre-election year. For the remainder of the year, pre-election performance has tended to be choppy and slightly subpar. In the end, however, the stock market has tended to outperform during the entirety of the pre-election year,” said the report.

The theory to support this behavior is that the party in power will make difficult economic decisions in the early years of a presidential cycle and then do everything within its power to stimulate the economy during the latter years in order to increase the odds of re-election. However, given the inordinate size of the punch bowl over the past two years, the historical pattern may not apply in 2011.

Putting the theory to the test, Global Macro Monitor researched S&P 500 returns since 1955 and found that the Index has not had a down year during the third year of a first term over this period.

As shown in the table below, the average annual return was 21.34%. (The Chart of the Day graph considered all third years, whereas the Global Macro Monitor study only considered third years of first terms.)

Caveat emptor: Even though the historical evidence on presidential cycles is bullish, there is obviously no guarantee that 2011 will toe the line.

http://www.dailymarkets.com/stock/2011/ ... over-2011/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118528
Joined: Wed May 07, 2008 9:28 am

Re: Presidential Cycle

Postby winston » Sun Jan 09, 2011 8:40 pm

~ The Presidential Election Cycle:

It’s argued that the first two years of a four-year presidential election cycle are usually the worst in terms of stock market performance. That’s because the government and the Federal Reserve attempt to rein in the excesses of the election year stimulus.

However, the third year of the election cycle (that would be 2011) is traditionally the best-performing year on Wall Street, with the election year itself in second place, as politicians try to stimulate the economy and help Wall Street.

But this didn’t work last time. The 2007-2009 bear market began in the third year of the Bush administration. And 2008, the election year, was terrible for the market, as it plunged by more than 50%.

And the stock market has risen strongly during the first two years of the Obama administration, opposite of the traditional cycle.

Source: Investment U
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118528
Joined: Wed May 07, 2008 9:28 am

Re: Presidential Cycle

Postby winston » Tue Feb 01, 2011 8:55 pm

A 100% Accurate Stock Market Indicator… Since 1940 By Dr. Steve Sjuggerud
Tuesday, February 1, 2011

In the last 100 years, this indicator has only been wrong twice… And one of those losses was less than 1%.

Since 1940, this indicator has been infallible… Stocks have risen 22% a year when this indicator says "buy."

We've been hard at work crunching numbers, developing our True Wealth Systems project. We have the world's deepest historical data sets at our fingertips. And we've been testing all kinds of investing systems going back hundreds of years.

Our goal is to find what works in investing, over the long run.

Today's indicator is incredibly simple: It's the third year of the presidential election cycle. Stocks have gone up every third year of a presidential election cycle going back to 1940.

In the third year of an election cycle, stocks have delivered a total return of 22% a year. For the other three years together – the other 75% of the time – the total return on stocks has been a single-digit percentage gain annually.

Why such a huge discrepancy?

Legendary stock market analyst Jeremy Grantham calls it the "routine Year 3 stimulus."
Barack Obama was elected in 2008. It's now 2011… Year 3. The stock market goes up, the theory goes, in anticipation of Big Government stimulating the economy in the coming pre-election year.

We have a double tailwind this year… Grantham says the Year 3 stimulus will be "spiced up" even more by "QE2" – what I call The Bernanke Asset Bubble.

I said this indicator has been infallible since 1940… but what about before then? We tested it back to 1800…

The thing is, until the Great Depression in the 1930s, government stimulus didn't really exist as we know it today.

In 1929, the lowest tax bracket was less than 1%. And the top tax bracket was in the 20s. Astoundingly, government spending as a percentage of GDP was less than 5% a year until the Depression (NOT including defense spending… which shot up during wars). These days, government spending (including spending by state and local governments) is up over 40% of GDP.

So if Grantham is right, and the routine Year 3 stimulus rally is here, stocks could go up yet again.

Stocks have delivered a 22% total return on average, going back seven decades, during Year 3. We're in Year 3 now. And stocks are only up about 2% so far. So there's plenty of room to run, based on history.

This indicator is another example of our True Wealth Systems work… finding things that I wouldn't believe are possible. So far, in every case, whenever I personally guessed against our systems, I was wrong, and our systems were right…

If this indicator from True Wealth Systems is right, it's a high probability bet for you to own stocks in 2011.

Source: Daily Wealth
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118528
Joined: Wed May 07, 2008 9:28 am

Re: Presidential Cycle

Postby winston » Sun Nov 20, 2011 8:37 am

TOL:-

Didnt they say that the third year, is always a good year for Equities ? What happened ?

And if this was a good year ? What's a bad year then ? :?
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118528
Joined: Wed May 07, 2008 9:28 am

Re: Presidential Cycle

Postby winston » Sun Mar 04, 2012 8:59 pm

Election Year and the Stock Market by Jason Jenkins


Year 1: The Post-Election Year

The first year of a presidency is characterized by relatively weak performance in the stock market. Of the four years in a presidential cycle, the first-year performance of the stock market, on average, is the worst.


Year 2: The Midterm Election Year

The second year also sees historically below-average performance. Bear market bottoms occur in the second year more often than in any other year.


Year 3: The Pre-Presidential Election Year

The third year is the strongest on average of the four years.


Year 4: The Election Year

In the fourth year of the presidential term and the election year, the stock market’s performance tends to be above average.


http://www.investmentu.com/2012/March/e ... arket.html
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118528
Joined: Wed May 07, 2008 9:28 am

Re: Presidential Cycle

Postby kennynah » Sun Mar 04, 2012 9:17 pm

Singapore context

Year 1: The Post-Election Year
Missing in action


Year 2: The Midterm Election Year
Still missing in action


Year 3: The Pre-Presidential Election Year
Suspected alien abduction


Year 4: The Election Year
a week before election, aliens return him to earth to shake hands and carry babies
Options Strategies & Discussions .(Trading Discipline : The Science of Constantly Acting on Knowledge Consistently - kennynah).Investment Strategies & Ideas

Image..................................................................<A fool gives full vent to his anger, but a wise man keeps himself under control-Proverbs 29:11>.................................................................Image
User avatar
kennynah
Lord of the Lew Lian
 
Posts: 16005
Joined: Wed May 07, 2008 2:00 am
Location: everywhere.. and nowhere..

Re: Presidential Cycle

Postby Muhajir » Mon Mar 05, 2012 11:31 pm

winston wrote:Get Ready For A Turbo Charged January Effect by Mebane Faber
Since World War II the S&P 500 has not had a down Year 3 at all with gains averaging 18% per annum.


:o Very interesting statistic.
Muhajir
Coolie
 
Posts: 220
Joined: Thu Dec 30, 2010 4:23 am
Location: Maldives

Next

Return to Other Investment Instruments & Ideas

Who is online

Users browsing this forum: No registered users and 4 guests

cron