Over the past few weeks, I have gotten a few calls from clients wondering how the stock market keeps rising will all the bad economic news. Fortunately the answer is easy – the Presidential Cycle bandwagon.
We are about to enter the third year of the Presidential Cycle. This theory states that on average the first two years of a presidential term result in weak performance of the stock market, while years 3 and 4 are stronger — with year 3 being the strongest.
This theory is backed by convincing data:
Since 1945, 94 percent of year 3 cycles have been positive. These are numbers that market historians cannot ignore. Investors who like to focus on historical trends are repositioning their portfolios in case the trend occurs again, thus driving market prices higher.