Presidential Election Cycle (Theory)

In strict numerical terms, the presidential cycle equals four years. That stretch of time defines a U.S. presidential term. Meanwhile, in political terms, the election cycle looks something like this: a bunch of egotistical no-name clowns banter about nonsense for about 18 months, then voters whittle down the field to a single clown from each party, until, finally, as a nation, we pick one of them to be Leader of the free world for that four-year stretch.

The theory we're talking about here puts the cycle into another context. It looks at the presidential election in terms of the stock market. The theory goes like this:

Action in U.S. stock markets tend to show weakness in the first year following a presidential election year. From there, things often improve...until the next election rolls around, of course.

The theory, detailed by Yale Hirsch, creator of the Stock Trader's Almanac, isn't perfect. It's not like charting when a future eclipse will happen, or predicting that digestive trouble will follow a large meal of Indian food. Instead, the theory merely describes a tendency: the market will likely be weakest in the year following the election of a new U.S. president.

As it just tracks a tendency, it often doesn't prove to be true. Also, unfortunately for backers of the theory, it proved more true in the mid-20th Century (closer to when Hirsch first developed the proposed presidential election/stock market connection) then it has been since.