How can I use this information?
If you've been looking for a period with a history of strong equity performance, this is it. That doesn't
mean that third years have been disaster free. The crash of 1987 occurred in a third year.
Remember also... it has been a long time since the current market has experienced a correction. But
measured optimism is definitely supported by the Presidential election cycle at this point.
The above data is from the S&P 500 (1950-2005). The S&P 500 was not in existence prior to 1950 but
the DJIA was. The average annual returns (excluding dividends) for the DJIA from 1900-2005 were
5%, 2%, 13% and 9% for the first, second, third and fourth years, respectively. In spite of such bullish
evidence, don't view the third year as a sure thing. The worst calender year return in the history of the Dow
was -53% in 1931, the third year of President Hoover's term in the Great Depression. However, the Dow
has not posted a decline during the third year of a Presidential term since it lost 3% in 1939.
If you stay out of the stock market during 2007, you'll have to wait four years for the Presidential election
cycle to be as bullish as it is right now.
SignalTrend's unemotional computer timing system is currently bullish, but it may change its buy / sell
signal in the near future. If that happens, SignalTrend will notify you by email. Remember, SignalTrend's
stock market timing system was backtested 100 years with excellent results!
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|The Presidential Election Cycle is Bullish on Stocks!
Proprietary Graphs, Tables and Analyses - All Rights Reserved
● 2007 is the third year of the four year Presidential term.
● The third year has been the most profitable for over 100 years.
● The third year has averaged 19% per year since 1949 (excluding dividends).
● The third year has not lost money since 1939.
● The last two years of a Presidential term have tripled the gains of the first two years.
|Presidential Election Cycle: S&P 500 1950-2005
Summary: The annual stock market returns above are categorized according to the four year term of the
Presidency. 2007 is the third year of this Presidential term. The average annual return for all of the third years
from 1950 through 2005 was 19%. First, second, and fourth years have averaged 3%, 5% and 9% respectively.
Third year gains have exceeded that of the first, second and fourth years combined. (3% + 5% + 9% =
17%). The worst return during a third year was 2% (1987). There were no loses during third years.
Maximum draw down is the loss incurred at the lowest point during the year since the previous year's close.
The maximum draw down for the third year was -9%. So, if you had invested in every third year of each
Presidential term since 1949, you would never have been down more than 9% at any time during any year
(measured from the daily close of the S&P 500 rather than intra day lows).
|S&P 500 returns from 1950 through 2005, not including dividends.
Note for non U. S. subscribers:
U.S. Presidents serve for a four year term. Presidential elections are held in November of the fourth year.
Presidents begin the first year of their term in January of the year following the November election. President
Bush was elected to his second term in November of 2004. The first year of his second term was 2005.
Accordingly, 2007 is the third year of this Presidential term.
Congressional elections occur in both the second and fourth year of each Presidential term. (e. g. 2006 and 2008).
The election held in November of 2006 was a Congressional election.