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Stock Market and the National Election Cycle

March 19, 2024 • Posted in Calendar Effects, Political Indicators

Some stock market experts cite the year (1, 2, 3 or 4) of the U.S. presidential term cycle as a useful indicator of U.S. stock market returns. Game theory suggests that presidents deliver bad news immediately after being elected and do everything in their power to create good news just before ensuing biennial elections. Are some presidential term cycle years reliably good or bad? If so, do abnormal returns concentrate in certain quarters? Finally, what does the stock market do in the period immediately before and after a national election? Using daily and monthly S&P 500 Index levels from January 1928 through Feb 2024 (about 96 years and 24 presidential terms) and focusing on “political quarters” (Feb-Apr, May-Jul, Aug-Oct and Nov-Jan), we find that: (more…)

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