We're now entering the absolute best period of time to own stocks. We could see two years of fantastic profits thanks to this odd election-cycle indicator. when Democrats have held the Oval Office. Stocks have increased just 2% a year when Republicans have held office. That’s a great example of what I’m talking about – the result is far outside of any statistical norms. It’s an extreme result, any way you look at it. But something else has an even bigger influence on stock returns than which party is in office... It turns out that the most important factor around presidents and stock prices isn’t which party is in office, but what point we are at in a given president’s term. We call this powerful idea the “election-cycle indicator.” The conclusion from this indicator is: Stocks tend to perform best at the end of a president’s four-year term... regardless of which party is in power. The table to the left shows how extreme this phenomenon has been, going back to 1950. Take a look at the chart... As you can see, the biggest gains in stocks happen during the third and fourth years... And we’ve seen typical gains of more than 20% during the third year. That’s an incredible result.
Still, from a high level, politics has a huge impact on your investments. We can learn a lot about the market based on major long- term political cycles. That brings us to the good news... Stocks are about to boom – for as long as two years – thanks to our current position in the presidential election cycle. It won’t be because of President Donald Trump’s next tweet or a piece of legislation. Instead, it all comes down to the lessons of history we’ve learned from elections. You see, from a high level, politics does have a surprisingly large effect on financial markets... I never would have believed just how powerful an influence politics has on the markets if I hadn’t crunched the numbers myself. And the conclusions are even more surprising... For example, stocks tend to perform better when Democrats are in office. Since 1928, the benchmark S&P 500 Index has risen roughly 9% a year (not including dividends)
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