The Presidential Term

Abstract

Is there a relation between security returns and the year of a U.S. president's term? The answer is yes. There is a prominent pattern in stock returns that relates to the presidential term. Equities have generally prospered in the second half of a president's term, especially during the third year. Further analysis reveals that monetary policy actions correspond with the identified return pattern—Fed policy has generally been significantly more accommodative during the third year of a president's term. The evidence overall strongly suggests that investors should carefully monitor the actions of policymakers and the political calendar before they make investment decisions.

TOPICS: Financial crises and financial market history, fixed-income portfolio management, in markets