Mark Hulbert had a good discussion concerning the Presidential cycle recently.
(Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va.)
When he looked at the Presidential cycle he found that the 3rd year in office is very positive for the stock market. He went back to 1896, using Dow data, and reported the following average %-advances.
Year of President's term
|
Average Dow return
|
(9/30 to 9/30)
1
|
8.8%
|
2
|
0.4%
|
3
|
15.5%
|
4
|
4.1%
|
He also found that it didn’t matter whether the previous year had been up or down and made statistical checks for validity of the data.
Mr. Hulbert reminded his readers that this phenomenon has been mentioned by many researchers before, so this is not a new finding. The theory is that politicians will do anything to stay in office.
That is one reason many think this year will be a good one overall.
Since I can’t tell what will happen this year in the market, I follow the Navigate the Stock Market analysis. That gives me a view of what will happen in the near term. By avoiding near-term pullbacks, I avoid the problems that may look like small corrections when they start, but become bear markets later.
Regarding our view of the market…
The Navigate the Stock Market analysis (NTSM) called a SELL on the S&P 500 on 22 February 2011. That was the first change since the 2 July 2010 Buy-signal.
