We’re Nearing the Low of the Presidential Election Cycle

Next Tuesday marks the end of the third quarter. It also marks the historic low of the Presidential Election Cycle.

I’ve averaged the entire 118-year history of the Dow Jones, and found that the index had made its historic low on September 30 of each mid-term election year. Market historians will note that indexes have made major lows in mid-term election years (1962, 1966, 1974, 1982, 1994 2002).

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After September 30, the Dow has rallied for an average gain of 21.2% until September 7 of the pre-election year. That’s a tremendous gain. To put that into some context, the Dow has made nearly two-thirds of its historic gain in less than one-quarter of the time in the four-year cycle.

From there, the Dow gets sluggish during election, but it continues to rally another 14% until August 4 of the post-election year.

Then comes the dark patch. The Dow has lost an average of 3.7% from August 4 of the pre-election year until September 30 of the mid-term year. That 14-month stretch is traditionally the weakest period for the stock market.

Just to be clear, I’m not in favor of making any investment decision based on this data. These are averages going back more than 100 years. I simply think it’s interesting how the market has behaved historically.

Posted by on September 22nd, 2014 at 12:48 pm


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