Market Trends in Mid-Term Election Years

The quote “History doesn’t repeat itself, but it does rhyme” is credited to Mark Twain — although there is no evidence that he ever said it.

The same can often be said of market cycles.  Since 1900, mid-term election years have had the worst median performance of any year in the four year presidential cycle — just 4.1%.  It happens to be sandwiched between the two best performing years of the presidential cycle as median returns in post election years is 11.8% (think about the strong performance last year for stocks). In addition, year three of the presidential term or pre-election year boasts the best of the presidential cycle up 14.4% as the incumbent party pulls all stops to be re-elected.

If history is to “rhyme” again this year, one could expect more of this trendless, saw-tooth trading action into the fall and before a year-end rally as the uncertainty of the election is removed.  The red line in the chart above shows the bumpy, sideways ride for investors in 2018, while the blue line shows the average experience since 1900.

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