The Presidential Cycle is a four-year U.S. stock-market pattern with surprising consistency, regardless of the president or the party in office. This year is the cycle's crucial third year, after the midterm U.S. elections and prior to the general election, which bodes well for the broad market.
Historically, the third year -- particularly its first six months -- has been the cycle's best, with the S&P 500 gaining 17% on average in the third year of the president's term since 1945, according to S&P. The top sectors in the third year since 1970 have been cyclical, chiefly technology, materials, industrials and consumer discretionary.
"We have never had the market decline in the third year since World War II," reports Sam Stovall, chief investment strategist at Standard & Poor's Equity Research. "The party in power wants to stay in power, so they stoke the engines of the economy in Year 3, which bears fruit by Year 4."
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