2018: The Weakest Year In The Presidential Election Cycle Has Begun

Authored by Dmitri Speck via Acting-Man.com,

The Vote Buying Mirror

Our readers are probably aware of the influence the US election cycle has on the stock market. After Donald Trump was elected president, a particularly strong rally in stock prices ensued.  Contrary to what many market participants seem to believe, trends in the stock market depend only to a negligible extent on whether a Republican or a Democrat wins the presidency. The market was e.g. just as strong under Democratic president Bill Clinton as it was under Republican president Ronald Reagan.



The mid terms specter.

From a statistical perspective, the decisive factor for the market trend is not the party allegiance of the president, but rather the year of the presidency. In this context we speak of the presidential cycle, which has a distinct pattern over its four year duration.

The following chart depicts this election cycle, i.e., the average four-year pattern of the Dow Jones Industrial Average over more than a century. On the left hand side you see the pattern during the election year, followed by the first post-election year. Thereafter comes the mid-term pattern – which is highlighted by a red circle – and lastly the pre-election year pattern.



DJIA, presidential election cycle since 1900.  The mid-term year is the weakest period of the cycle

In the past 116 years the DJIA delivered the strongest performance during election and pre-election years on average. Post-election years typically also managed to generate gains. The mid-terms were typically the weakest time period.

2018 is a mid-term year. Should we expect weakness in the stock market? Let us take a closer look at the mid-term pattern of the market.


The Typical Mid-Term Year Under the Magnifying Glass

The next chart shows the typical pattern in the Dow Jones Industrial Average during mid-term years. In short, it is  a close-up of the time period circled in red in the first chart.



DJIA, typical pattern during mid-term years since 1900 – a  significant decline tends to begin in April

The average mid-term year starts out with an advance, which is followed by weakness after peaking in mid April. In the final quarter of the year the market rallies again.

Over the year as a whole, the market on average barely manages to gain ground. What does this mean for 2018?


A Decline Threatens in 2018

If the market moves sideways on average, it implies that prices fell in some years and rose in others.  In the long run stock prices tend to rise, due to economic growth and particularly due to the continual debasement of money – just as in fact tends to happen in the other three years of the presidential cycle.

Given that prices on average barely rise in mid-term years, there is obviously a heightened probability of declines. Thus there is a threat of a sizable fall in stock prices in 2018.



Prepare, then this cannot happen to you… [PT]

And what about other markets, such as the gold market or the foreign exchange markets?

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Something you may not be aware of is that the election cycle affects other markets as well. This is something one can definitely take advantage of as a trader, investor or broker. In order to do so, visit my free-of-charge web site www.seasonalcharts.com or call up the Seasonax app on a Bloomberg or Thomson-Reuters system.  Nothing is ever guaranteed in the markets, but you should let the probabilities work in your favor!


CoinBug21 Sat, 01/13/2018 - 16:36 Permalink

Stupid article.  S&P is going to be at 3,000 very soon.  Get ready for another year of double digit gains is US stocks.   This bull run is just beginning.  These trump tax cuts are going to change the world.

Davidduke2000 CoinBug21 Sat, 01/13/2018 - 19:33 Permalink

change the world alright , 2 trillions us deficit per year, major depression worldwide.

I cannot believe there are people believing this shit considering the only buyers for stocks worldwide are the central bankers which is illegal and fraudulent , but who cares, as long each person making the necessary steps to survive the tsunami and protect his or her wealth.

In reply to by CoinBug21

ipsprez CoinBug21 Sun, 01/14/2018 - 02:32 Permalink

Stupid article is right, just another example of why statistics are dangerous. They can be manipulated to say whatever the author wants them to say, within reason of course. Remember this is an average so obviously there were years where the yields were much lower and also years where the yields were much higher. Using this as a warning that we will see a major corrections is highly speculative.

In reply to by CoinBug21

CoinBug21 Sat, 01/13/2018 - 16:37 Permalink

Stupid article.  S&P is going to be at 3,000 very soon.  Get ready for another year of double digit gains is US stocks.   This bull run is just beginning.  These trump tax cuts are going to change the world.

adolphz Sat, 01/13/2018 - 16:47 Permalink

Assuming anything at this point is ridiculous.  The zerohedge analysts from SHEPWAVE  called Trump rally and  continue to call stawks oil and gold. Wait for them to say there is a change trend.

MuffDiver69 Sat, 01/13/2018 - 19:45 Permalink

You show me a year a company as large as Fakebook can lose 4% like Friday and the market goes up 200 like it was a fart in the wind. Some rocket fuel got dumped on this bad boy(tax reform) that can’t be denied..that said DOW 30k by March...hehehehe