Presidential Cycle: Impact on the Stock Exchange

The economic cycle is well known to us, but have you heard of the presidential cycle? In November, we will observe presidential elections in the United States, so it's worth knowing how it will affect the stock market.

The presidential cycle is a term used in the context of the stock market, referring to a certain regularity observed in stock markets depending on the year of the US president's term.

The Presidential Cycle and the Stock Market

According to this cycle, different years of the presidential term have different effects on the stock market. Statistically, the pre-election year, which is the last year of the president's term, is usually the most favorable for the stock market. For example, historically, the S&P 500 index has grown an average of 17.1% in the pre-election year and has never been negative during this time.

Reasons for the Presidential Cycle

One of the reasons for this market behavior may be that the incumbent president typically intensifies actions aimed at stimulating the economy in the year preceding the elections, which can lead to growth in the stock markets.

Limitations of the Presidential Cycle

However, it is important to remember that although the presidential cycle is an interesting phenomenon, it is not a reliable indicator of future market performance. Various factors, such as global economic and political events, can influence stock markets.