The Low Point in the Presidential Election Cycle

We’re coming up on an important day for investors. One month from now is the market’s historic low point during the Presidential Election Cycle. Historically, September 30 of the mid-term year is the best time to buy stocks.
A few years ago, I crunched the entire history of the Dow from 1896 to 2007. Here’s what I found:
Historically, the Dow has gained an average of 24.1% from September 30 of the mid-term election year to September 6 of the pre-election year. This means that nearly two-thirds of the Dow’s four-year gain (24.1% of 36.7%) comes in less than one-quarter of the time. That’s a pretty stunning stat.
After September 6 of the pre-election year, the Dow has historically pulled back 5.2% to May 29 of the election year. After that, it puts on a nice 23.2% climb to August 3 of the post election year. Then trouble starts. After September 3, the Dow then pulls back 5.6% and we’re back at our starting point, September 30 of the mid-term election year.

Warning: I don’t put much faith in this statistical oddities for gaining a trading advantage. I simply think they’re interesting in what they reveal about market history.

Posted by Eddy Elfenbein on August 27th, 2010 at 6:30 am

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