The Weekly Update 12/13/2024
The Presidential Election Cycle
The Presidential Election Cycle is also known as the “four year cycle” and refers to a four year pattern in the value of Corporate America, as measured by the S&P 500.
The pattern over time, per Ned Davis Research is this:
Year 1 (2025) up
Year 2 (2026) down
Year 3 (2027) up
Year 4 (2028) sideways to little bit up
The presumption is that Year 1 is equivalent to the first year of a president’s term. In the first year, everyone is in a “honeymoon” phase with the new president, waiting for all of the election promises to be fulfilled, so there is optimism on Wall Street and Main Street.
In Year 2, the President and Congress begin the ugly work of actually balancing budgets, working on tax issues, and generally keeping things going. By this time, the optimism has worn off and the general public realizes it’s “business as usual” in Washington.
In Year 3, the President is trying to lay the groundwork for his re-election campaign or in the current case the re-election of his party, so there are more promises, tax cuts, and general feel-good programs going on.
Year 4 is the actual election year, so the public and Wall street are watching the elections and trying to discern which party would be better for their pocketbook.
The Key question, as always, is … does it work. According to Ned Davis Research, it does. Unfortunately, you would have to be more trading oriented, as you would in the above example sell everything at the end of 2025, stay out of your investments in 2026 and buy back in 2027.
Taxes could be worse than a potential drawdown in market values. This is based on Ned Davis Research going back to 1952. The world is a touch different today.
At The Wealth Strategies Group, we will simply observe our Seven Signs of a Changing Economy ™ with this statistic and many others we know and trust in our “what next” tool box.
Being a data miner, I love this type of statistic, yet rarely do we act on it alone. Instead it is more reasonable to make thoughtful adjustments in our client family asset allocations and investment positions base on each families constraints for time, risk and volatility.
I am interested in your thoughts, comments, and observations. Feel welcome to call, email, or stop by the office and say Hi.
Respectfully,
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.