The Presidential Effect

We talked recently about the effects of a deadlocked Congress on the stock market, but the presidential elections, of course, have a profound impact on the economy as well. And of course, as with every other possible effect on the market, someone has studied this too. It turns out that the period just after the midterm elections have been historically pretty solid.

There have been 17 elections in the middle of a presidential term since 1942. Each time, the following 200 days produced a gain in the S&P 500 of at least 18 percent. We'll be starting the next such period less than a month from now.

And there's another potentially positive indicator. The breakdown for the Dow Jones' return in the various years of a presidential term (from 1900 to 2009) are as follows:

Year 1: 5.5 percent

Year 2: 3.7 percent

Year 3: 12.6 percent

Year 4: 7.5 percent

Obama's Year 3 starts in January 2011. Does this mean anything? Is it all just a fluke? Who knows, but at this point, we'll take all the good news we can get.