The Presidential Election Cycle And Stock Market Returns

An interesting tidbit from JP Morgan regarding the presidential election cycle and expected stock returns. The firm has run the numbers and found that the 3rd year of the presidential cycle is the single best time to be invested in the market. In fact, since 1948, investors have enjoyed on average 18% in the 3rd year of a presidential term. I had heard about this trend but was surprised by how much the average return was. The reason for the strong performance, according to JP Morgan is "the dilution of executive and legislative powers that tends to occur in the second half of a presidential term usually reduces the scope for political interference in financial markets." Regardless of the reason, the out performance is statistically significant and something to remember going into 2011.

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