Four Year Cycle – A Lengthy Bear Market After The Election?

Drivers of the presidential election cycle

How come that returns are weak in the two years after the election, while they are quite strong in the two years preceding the election? The drivers are monetary and fiscal policy: presidents want to be re-elected or want their successor to be a member of their party. Thus they try to stimulate the economy before the election in order to generate positive sentiment among voters. This includes measures financed by deficit spending. Loose fiscal policies tend to provide a boost to financial markets.

The not entirely independent central bank appears to support incumbent presidents through its monetary policy as well.

On the other hand, after the election, unpopular measures begin to proliferate, such as e.g. steps intended to limit escalating government debt. This tends to put pressure on stock prices.

Even though it is perhaps difficult to imagine in light of current fiscal deficits in the trillions and ballooning central bank balance sheets: in coming months, there may be less money "printing" than would be the case if an election was lying ahead.

Take advantage of the filter function!

As you can see, with Seasonax you can investigate more than just annual seasonality. If you want to know how e.g. gold or the euro behaves within the four-year cycle, you should call up the filter function at right away!

Filter function on Seasonax, with election cycle highlighted

Filter Functionality in Seasonax

Apart from annual seasonality, you can inter alia examine the typical patterns emerging for gold, the euro or all other instruments in special years such as the post-election year with just a few mouse clicks.

In addition, you can also select other types of cycles, or filter out years containing extreme statistical outliers.

Take advantage of this filter function! It can be a very useful addition complementing your seasonal studies.

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