There has been only one down year for the Dow Jones Industrial Average in the third year of a presidential term since 1939. Typically, a bear market occurs in the first or second year of each term, and a bull market resumes right around midterms, delivering strong gains from the elections through the end of the following year.
Adding up all market returns over the 47 presidential administrations since 1833, you find the first 2 years produced a total gain of 327%, while the last two years produced a gain of 772%. And the 3rd year of presidential terms in particular has been the best by far. Here are the average gains in the Dow Jones Industrial Average during the presidential cycles:
Year 1: 3%
Year 2: 4%
Year 3: 10.4%
Year 4: 6%
The midterm elections delivered a split government giving markets confidence that further inflation-igniting stimulus is over.
Sven Franssen