Yet for stock market mavens who have read up on the four-year presidential election cycle, what is occurring in the markets looks quite familiar.
The market soared early in Donald J.
This rough pattern isn’t a constant throughout history, but it has occurred quite frequently in presidencies going back to 1900.
Ned Davis Research ran the numbers a second time, for 1948 through 2021, using the S&P 500 and a predecessor index.
Why the midterm year — and, in particular, the first half of the year — is often a weak period for stocks is unclear.
Yet many researchers in the academic world and on Wall Street have examined the numbers and concluded that the pattern of midterm year weakness, and greater strength for stocks later in the presidential cycle, is fascinating enough to merit further study.
From 1901 through February, for example, and adjusted for inflation, the Dow returned 3.8 percent annualized under Democratic presidents, versus 1.4 percent under Republicans, Ned Davis Research found.
Furthermore, based on the historical data, the best political alignment for the stock market is one that could arise this November if the Democratic Party has a major setback.
But that limited insight early in a president’s second year only makes it harder to make bets on the direction of policymaking in Washington.
There is another common theory, one that I find appealing because it does not flatter the political establishment.
The theory starts with the premise that even the best presidents are, first and foremost, politicians.
In the first half of a presidential term, however, when the White House and Congress get down to the mundane business of governing, there is frequently a compelling need to pare down government spending or to encourage the nominally independent Federal Reserve to raise interest rates and restrict economic growth.
Through March, despite the bad stretch in the market this year, stock returns have been comparatively good during the Biden presidency, with a cumulative gain in the Dow of 12.1 percent, well above the median of 8.1 percent since 1901.
Well, the pattern of the presidential cycle suggests that the market will begin to rebound late this year and rally next year — the best one, historically.
I wouldn’t count on any of these predictions or patterns.