Presidential Election Cycle (Theory)


DEFINITION of 'Presidential Election Cycle (Theory)'

A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a new U.S. president. According to this theory, after the first year, the market improves until the cycle begins again with the next presidential election.

BREAKING DOWN 'Presidential Election Cycle (Theory)'

While the theory played out relatively reliably in the early to mid 1900s, data from the later twentieth century has disproved it.

In 1937, Franklin D. Roosevelt's first year, the market was down by 27.3%. The Truman and Eisenhower eras also started off with a down year in the stock market. The start of more recent presidencies, however, did not show the same pattern. In George H.W. Bush's first year, the market was up 25.2%, and the start of both of Bill Clinton's terms showed strong market performance - up by 19.9% and 35.9%.

  1. Sports Illustrated Swimsuit Issue ...

    An indicator based on the nationality of the model on the cover ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a ...
  3. Aspirin Count Theory

    A market theory that states stock prices and aspirin production ...
  4. Leading Lipstick Indicator

    An indicator based on the theory that a consumer turns to less ...
  5. Skirt Length Theory

    The idea that skirt lengths are a predictor of the stock market ...
  6. Boston Snow Indicator

    A market theory that states that a white Christmas in Boston ...
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Active Trading

    The Leap-Year Phenomenon

    Find out if you can build a strategy around the behavior of the market in the presidential cycle.
  3. Fundamental Analysis

    The Market And Presidential Promises

    How can the presidential election affect your portfolio? Find out here.
  4. Fundamental Analysis

    For Higher Stock Returns, Vote Republican Or Democrat?

    The president's political party is correlated to market performance. Find out which party tends to outperform.
  5. Active Trading

    Market Cycles: The Key To Maximum Returns

    You need to understand the various phases of the market cycle to avoid bubbles and make the best investments.
  6. Retirement

    Economic Indicators To Know

    The economy has a large impact on the market. Learn how to interpret the most important reports.
  7. Options & Futures

    Terrorism's Effects on Wall Street

    Terrorist activity tends to have a negative impact on the markets, but just how much? Find out how to take cover.
  8. Professionals

    Common Interview Questions for Project Managers

    Discover the basic skills needed for a position as a project manager along with common interview questions used in applying for such a position.
  9. Investing Basics

    Understand How the Stock Market Works

    Learn what it means to own stocks and shares, why shares exist, and how you buy and sell them.
  10. Investing Basics

    3 Key Signs Of A Market Top

    When stocks rise or fall, the financial fate of investors change, as well. There are certain signs that can reveal a stock’s course, and investors don’t need to be experts to spot them.
  1. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  2. What is the difference between shares outstanding and floating stock?

    Shares outstanding and floating stock are different measures of the shares of a particular stock. Shares outstanding is the ... Read Full Answer >>
  3. What is the difference between market risk premium and equity risk premium?

    The only meaningful difference between market-risk premium and equity-risk premium is scope. Both terms refer to the same ... Read Full Answer >>
  4. What is the difference between the QQQ ETF and other indexes?

    QQQ, previously QQQQ, is unlike indexes because it is an exchange-traded fund (ETF) that tracks the Nasdaq 100 Index. The ... Read Full Answer >>
  5. What is the difference between an investment and a retail bank?

    The activities and types of clients for an investment bank versus those for a retail bank highlight the primary difference ... Read Full Answer >>
  6. Will technology ever disrupt the role of the custodian bank?

    Custodian banks, along with other financial institutions that hold custodian accounts, are likely to be disrupted but not ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center