Which Presidential Term Year is the Most Profitable?

15 set

An intriguing question from a recent client call led me to dive into the data. Here's what I uncovered about the relationship between presidential term years and stock market returns.

The Analysis

• Data: Historical SPX (S&P 500) returns
  
• Grouping: 1st, 2nd, 3rd, and 4th years of presidential terms
  
• Visualization: Each line represents returns for a specific term year
  

Color Key

• 1st year: Red
  
• 2nd year: Orange
  
• 3rd year: Green
  
• 4th year: Yellow
  
• Total SPX: White
  
• Combined 1st + 3rd years: Purple
  

Key Findings

• The Winner: 3rd Year The third year of presidential terms significantly outperforms others, beating 2nd and 4th years by a notable margin.
  
• Runner-up: 1st Year Surprisingly, the first year takes second place. Perhaps the optimism surrounding a new presidency plays a role?
  
• Underperformers: 2nd and 4th Years 2nd years appear relatively uneventful. 4th years (election years) show more volatility, likely due to electoral uncertainty.
  
• Combined Power of 1st and 3rd Years The purple line (1st + 3rd years combined) closely tracks the total SPX return (white line), suggesting these two years drive a significant portion of overall market gains.
  

Important Notes

• Not every year within each category showed positive returns.
  
• The analysis reveals average trends, not guarantees for future performance.
  

Food for Thought

• How might this insight influence long-term investment strategies?
  
• What factors could explain the 3rd year's outperformance?
  
• Does this pattern hold true across different economic cycles or administrations?
  

What's your take on this analysis? Does it shift your perspective on market cycles or political terms?