Conclusions:
● Presidential Election Cycle (PEC) was the dominant cycle during 1965-1980.
● PEC was a visible cycle during 1981-2000.
● PEC became the dominant cycle again during 2001-2004.
● SignalTrend outperformed in each period. (1965-1980, 1981-2000, 2001-2004)
● Test periods less than 20 years are insufficient.
● Presidential Election Cycle (PEC) was the dominant cycle during 1965-1980.
● PEC was a visible cycle during 1981-2000.
● PEC became the dominant cycle again during 2001-2004.
● SignalTrend outperformed in each period. (1965-1980, 1981-2000, 2001-2004)
● Test periods less than 20 years are insufficient.
Introduction:
The Presidential Election Cycle has been evident in the stock market for a long time. It is a four year cycle, four years being the
length of a president's term. Since 1964, stocks have performed worse during in the first 22 months of a presidents term than
during the remaining 26 months of the term. It is one of many cycles and forces that drive the stock market. According to Cyclic
Theory, it becomes most visible when other forces are relatively neutral. The Figures 1a and 1b below illustrate one such period
when the cycle is obvious (1965-1980).
Figure 2b shows the strength of the cycle during the 1981-2000 period.
The 2001 - 2004 period was clearly dominated by the cycle. That period is included in Figure 3.
The use of graphs to generate clear buy or sell signals for the 2005 - 2008 term will be explored in a future issue of SignalTrend's
Strategy Research Monthly.
The proposition that repetitive financial cycles exist may challenge theories that veteran investors have formed through years of
observation. The evidence presented herein spans nearly half a century. Please give this theory your earnest consideration. An
objective seeker of knowledge will follow the evidence... wherever it leads.
The Presidential Election Cycle has been evident in the stock market for a long time. It is a four year cycle, four years being the
length of a president's term. Since 1964, stocks have performed worse during in the first 22 months of a presidents term than
during the remaining 26 months of the term. It is one of many cycles and forces that drive the stock market. According to Cyclic
Theory, it becomes most visible when other forces are relatively neutral. The Figures 1a and 1b below illustrate one such period
when the cycle is obvious (1965-1980).
Figure 2b shows the strength of the cycle during the 1981-2000 period.
The 2001 - 2004 period was clearly dominated by the cycle. That period is included in Figure 3.
The use of graphs to generate clear buy or sell signals for the 2005 - 2008 term will be explored in a future issue of SignalTrend's
Strategy Research Monthly.
The proposition that repetitive financial cycles exist may challenge theories that veteran investors have formed through years of
observation. The evidence presented herein spans nearly half a century. Please give this theory your earnest consideration. An
objective seeker of knowledge will follow the evidence... wherever it leads.
1) Historical Summary: 1965 - 1980 (Dow Jones Industrials)
| Figure 1a 4 Presidential Election Terms (1965 - 1980) |
2) Historical Summary: 1981 - 2000 (Dow Jones Industrials)
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| Presidential Election Cycle Strategy Research: Summary, Analysis and Long Term Test Results |
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SignalTrend
| Post Election Year |
| Midyear |
| Pre-election Yr |
| Election Year |
| Post Election Year |
| Midyear |
| Pre-election Yr |
| Election Year |
| Figure 1b Average of 4 Presidential Election Terms (1965 - 1980) |
| E l e c t i o n |
| I n a u g u r a t i o n |
Analysis:
The election year is not the beginning of a president's term. It is the last year of his term. Presidents are inaugurated in
January of the year following the election year (herein called the Post Election Year). Observe that stocks bottomed in the
Midyear of every term!
The election year is not the beginning of a president's term. It is the last year of his term. Presidents are inaugurated in
January of the year following the election year (herein called the Post Election Year). Observe that stocks bottomed in the
Midyear of every term!
| 1965 - 1968 1969 - 1972 1973 - 1976 1977 - 1980 |
Analysis:
This graph is an average of the four four year terms contained in figure 1a. The tendency to decline from the election through
September of the Midyear is obvious. The recovery from September of the Midyear through the end of the Election Year is
equally clear.
The lesson of 1965-1980 was to be Bearish during the Post Year and most of the Midyear... then to be bullish until the end of
the Election Year. (That is how an investor at the beginning of 1981 would have viewed it.) That is one lesson that investors
during 1981-2000 would have to unlearn. As you will see in figure 2b below, the first 22 months were typically Bullish markets
during 1981-2000... the opposite of how the first 22 months performed during 1965-1980! (See Figures 2b and 1b.)
This graph is an average of the four four year terms contained in figure 1a. The tendency to decline from the election through
September of the Midyear is obvious. The recovery from September of the Midyear through the end of the Election Year is
equally clear.
The lesson of 1965-1980 was to be Bearish during the Post Year and most of the Midyear... then to be bullish until the end of
the Election Year. (That is how an investor at the beginning of 1981 would have viewed it.) That is one lesson that investors
during 1981-2000 would have to unlearn. As you will see in figure 2b below, the first 22 months were typically Bullish markets
during 1981-2000... the opposite of how the first 22 months performed during 1965-1980! (See Figures 2b and 1b.)
Signals the Trend... in Stocks and Interest Rates Backtested 100 Years !