The Weekly Update 8/5/2022
2023 could be rewarding to the owners of Corporate America!
Over the years I have often referred to the work of Ned Davis Research, because it is well documented, quantifiable and mostly accurate.
As we are now just five months away from the 2023 border, it made sense to look back on two trends that have been more accurate than not, over the last several decades.
That said, let me note one of our WSG rules of thumb is: “no one knows the future”, including historically great statistics. However, they are a tool in the toolbox to use, measure and compare.
First up is the Presidential Cycle. This is sometimes referred to as the four-year cycle. The theory suggests year one (2021) of a President’s term is known as the “honeymoon”, as the new President brings optimism to investors and the markets in general.
In the second year, the dirty work of planning budgets, tax code change and keeping campaign promises brings a gray cloud over the year one optimism. Thus, year two (2022) tends to be a down year.
In year three of the four-year cycle (2023) the President, and his party, are preparing for their re-election campaign so there tends to be more positive programs the President presents, and better investment returns for the investor community.
The fourth year in the cycle is the election year. Investors and all of Wall Street is anxious as they watch to determine which party will be better for the household net worth. Thus, year four (2024) tends to be a flat to slightly up performing year.
In summary, the four-year cycle is:
Year 1 (2021) – Up
Year 2 (2022) – Down
Year 3 (2023) – Up
Year 4 (2024) – Flat to slightly up
Another interesting data set is the Dow Jones 10-year cycle. In summary, it tracks data going back 125 years to 1897. Seasonax.com Research summarizes, that on average, the years of each decade ending “0”, “1” and “2” are negative performers. The years ending in “3” are positive performers. “4” are flat-ish, with years ending in “5” and “9” being the best two performers of each decade, again, “on average”.
If you are interested in seeing a cool graphic of this, just do an internet search for “Seasonax Dow Jones 10-year cycle”.
Overlap these two data sets and history would suggest that our ‘3” year, 2023 should do well, year “4” flat-ish and then an excellent “5” year performance for 2025. Both data sets above “suggest” this to be historically accurate.
I am not a believer in Ouija boards, witchcraft or hocus pocus, but I am a lover of trends, especially when they repeat over decades.
As you read here in last week’s edition of The Weekly Update (Read it Here) and in last month’s issue of The Seven Signs (Read it Here), we likely still have a few speed bumps to get over in 2022. However, these speed bumps could set the stage for a rewarding 2023.
I’m interested in your thoughts, comments and observations. Feel welcome to call, email or stop by the office and say Hi.
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. 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.