With the inauguration of the 46th President of the United States only a week away, investors should consider the market pattern through the presidential election cycle.

The first year of a presidential term on average is not the best of the four-year cycle for the stock market. The S&P 500 ended lower in the first year after 10 of the 23 elections since 1928. However, the S&P 500 posted an average 22.07% advance in the first year of 13 presidential terms when the market had a gain.

Between 1950 and 2019, the stock market had annual gains 73% of the time. In year three of the presidential election cycle, the S&P 500 had an annual increase 88% of the time. In contrast, the market gained only 56% and 64% of the time, respectively, during years one and two of presidential terms.

 

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