Found in publications such as the Stock Traders Almanac, The Presidential Election Cycle is the theory that different phases of the presidential term are correlated to broad market conditions. As will many such theories, it may not hold up under a lot of scrutiny, but there are some correlations to be found.
Considering the widespread and overarching sentiments that may exist in a country’s population during the first year of a term (excitement, uncertainty) or during the campaign year (perhaps bearish uncertainty) , it is not entirely far-fetched to think that something like an Elliot Wave could capture evidence of large trends associated with presidential cycles.
Where it gets unpredictable is that, of course, most presidents are different people, there will be different kinds of news and global and domestic events driving sentiment, which will probably not be foreseeable.
Nevertheless, the theory suggests that some bear and bull conditions have existed in a very high correlation to certain years in a presidential term. It can be said, for instance, that an investor who buys around October of the second year in a presidential term and sells in December of the 4th year in the term will be likely to experience gains.
Whether the investor in this example is investing any money the other 44% of the time is another question. He would probably do just as well to stay in the market the entire time.
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