Which Presidential Term Year is the Most Profitable?
An intriguing question from a recent client call led me to dive into the data. Here's what I uncovered about the relationship between presidential term years and stock market returns.
The Analysis
Color Key
Key Findings
Important Notes
Food for Thought
What's your take on this analysis? Does it shift your perspective on market cycles or political terms?
The Analysis
- Data: Historical SPX (S&P 500) returns
- Grouping: 1st, 2nd, 3rd, and 4th years of presidential terms
- Visualization: Each line represents returns for a specific term year
Color Key
- 1st year: Red
- 2nd year: Orange
- 3rd year: Green
- 4th year: Yellow
- Total SPX: White
- Combined 1st + 3rd years: Purple
Key Findings
- The Winner: 3rd Year The third year of presidential terms significantly outperforms others, beating 2nd and 4th years by a notable margin.
- Runner-up: 1st Year Surprisingly, the first year takes second place. Perhaps the optimism surrounding a new presidency plays a role?
- Underperformers: 2nd and 4th Years 2nd years appear relatively uneventful. 4th years (election years) show more volatility, likely due to electoral uncertainty.
- Combined Power of 1st and 3rd Years The purple line (1st + 3rd years combined) closely tracks the total SPX return (white line), suggesting these two years drive a significant portion of overall market gains.
Important Notes
- Not every year within each category showed positive returns.
- The analysis reveals average trends, not guarantees for future performance.
Food for Thought
- How might this insight influence long-term investment strategies?
- What factors could explain the 3rd year's outperformance?
- Does this pattern hold true across different economic cycles or administrations?
What's your take on this analysis? Does it shift your perspective on market cycles or political terms?
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