Does The Presidential Cycle Have A Significant Impact On Stock Market Performance?

Summary

• The third year of a presidential cycle has historically offered outsized returns.
• In this study, data for 1928 to 2014 were analyzed to evaluate the effect of the presidential cycle on S&P 500 performance.
• Given that we are currently in Obama's third year (of his second term), should we be expecting significant gains ahead?

Introduction

In a previous article entitled "The January Effect Revisited And A Call For The Use Of Elementary Statistics", I made the case that assertions of outperformance should be supported by elementary statistics. In the case of the January effect, I analyzed monthly data from 1988 to 2014 to show that the standard deviation of monthly returns was actually very large compared to the average return for any given month, rendering most of the observed seasonal deviations to be statistically insignificant. Yet, the absence of error bars on the most popular graphs illustrating the January effect means that investors studying the chart would be unable to ascertain whether
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