The Presidential Cycle

Copyright 2013 Mike Burk & Alpha Investment Management

The Presidential Cycle is made up of 4 years beginning with the year the president is inaugrated. The material presented here is structured to help to identify some of the characteristics and/or dynamics of that 4 year cycle in the stock market.

I identify the cycle as the Presidential Cycle because I believe it is politically motivated. Prior to 1933 gold and silver were the medium of exchange and government had little control over money supply. Gold coins were removed from circulation by executive order in 1933 and redeemability was suspended. Shortly after the confiscation of gold, the currency was devalued to $35 an ounce from $20 (a 40% tax). US citizens could not redeem their gold certificates for gold, but foreigners could so in 1971 Nixon closed the gold window eliminating redeemability entirely and removing any intrinsic value from the currency. With control of the currency politicians are able to manipulate the economy to their advantage. Assuming this hypothesis is correct, it is not surprising the Presidential Cycle has become defined over the past 70 years.


The tables have 5 columns:

Period = The first and last years of the cycle. Click on the date in the period column to see a graph of the period.

Total return = The total change on a percentage basis of the index over the 4 year period

CAR = Compound Annual return = The total 4 year return on an annualized basis.

MDD = Maximum Draw Down = The greatest total decline during the 4 year period.

MDD date = The date of the MDD, the last digit in the sequence is the year position of the date in cycle.

The first table is data for the Dow Jones Industrial Average (DJIA) from 1885 - 2012. All of the figures are for the 4 year period. Click on the period for a graph.

Period Total return CAR MDD MDD date President
1885 - 1888 28.40% 6.25% 20.13% 4/2/1888 - 4 Grover Cleveland - D
1889 - 1892 1.33% 0..33% 22.57% 12/8/1890 - 2 Benjamin Harrison - R
1893 - 1896 -13.64% -3.60% 41.06% 8/8/1896 - 2 Grover Cleveland - D
1897 - 1900 74.82% 13.04% 31.75% 9/24/1900 - 4 William McKinley - R
1901 - 1904 -1.56% -0.39% 46.15% 11/9/1903 - 4 T Roosevelt - D
1905 - 1908 23.77% 5.19% 48.54% 11/15/1907 - 3 T Roosevelt - D
1909 - 1912 2.00% 0.49% 27.44% 9/25/1911 - 3 William Taft - R
1913 - 1916 47.58% 9.28% 19.36% 7/30/1914 - 2 Woodrow Wilson - D
1917 - 1920 -24.26% -6.70% 44.20% 12/21/1920 - 4 Woodrow Wilson -D
1921 - 1924 67.49% 12.10% 20.15% 8/24/1921 - 1 Warren Harding - R
1925 - 1928 148.94% 20.39% 16.70% 3/30/1926 - 2 Calvin Coolidge - R
1929 - 1932 -80.02% -33.15% 89.19% 7/8/1932 - 4 Herbert Hoover - R
1933 - 1936 200.18% 26.38% 24.03% 10/31/1933 - 1 FDR -D
1937 - 1940 -27.11% -7.60% 48.10% 3/31/1938 - 2 FDR - D
1941 - 1944 16.16% 3.68% 30.44% 4/28/1942 - 2 FDR - D
1945 - 1948 16.40% 3.73% 23.24% 10/9/1946 - 2 FDR - Truman - D
1949 - 1952 64.64% 11.72% 13.54% 7/13/1950 - 2 Harry Truman - D
1953 - 1956 71.11% 12.57% 13.04% 9/14/1953 - 1 Dwight Eisenhower - R
1957 - 1960 23.31% 5.39% 19.39% 10/22/1957 -1 Dwight Eisenhower - R
1961 - 1964 41.93% 8.38% 27.10% 6/26/1962 - 2 Kennedy - Johnson - D
1965 - 1968 7.96% 1.90% 25.21% 10/7/1966 - 2 Lyndon Johnson - D
1969 - 1972 8.08% 1.93% 34.85% 5/26/1970 - 2 Richard Nixon - R
1973 - 1976 -1.51% -0.38% 45.08% 12/6/1974 - 2 Nixon - Ford - R
1977 - 1980 -4.05% -1.03% 26.13% 2/28/1978 - 2 Jimmy Carter - D
1981 - 1984 25.68% 5.55% 24.13% 8/12/1982 - 2 Ronald Reagan - R
1985 - 1988 78.99% 13.55% 36.13% 10/19/1987 - 3 Ronald Reagan - R
1989 - 1992 52.33% 9.97% 21.16% 10/11/1990 - 2 George HW Bush - R
1993 - 1996 95.34% 15.41% 9.68% 4/4/1994 - 2 William Clinton - D
1997 - 2000 67.28% 12.09% 19.26% 8/31/1998 - 2 William Clinton - D
2001 - 2004 -0.04% -0.01% 35.74% 10/9/2002 - 2 George W Bush - R
2005 - 2008 -18.61% -5.02% 46.68% 11/20/2008 - 4 George W Bush - R
2009 - 2012 49.31% 9.54% 27.53% 3/9/2009 - 1 Barack Obama - D
Averages 32.57% 4.72% 30.55%

Click here for a page showing all of the DJIA charts stacked on a single page.

It is interesting that the MDD has occurred during the 2nd year of the cycle all but five times since 1933. Two of the five occurrences were during the Eisenhower administration and a 3rd during the 2nd year of the Reagan administration when the crash of 1987 (the 3rd year of his 2nd term) exceeded all declines in 1986. The fourth, in 2008, during the 4th year of the second George W. Bush term was the first time the MDD occurred on the 4th year since the Hoover administration in 1932. The fifth occurrence in 2009, the 1st year of the Obama adininstration was an extension of the previous 4th year (Bush) decline.

George W. Bush, FDR and Theodore Roosevelt are the only presidents that have been re-elected after a decline over their terms.


The next table shows data for the S&P 500 (SPX) from 1929 - 2008.

Period Total return CAR MDD MDD date
1929 - 1932 -71.70% -27.07% 86.22% 6/1/1932 - 4
1933 - 1936 149.35% 20.42% 33.93% 3/14/1935 - 3
1937 - 1940 -38.42% -11.41% 54.50% 3/31/1938 - 2
1941 - 1944 25.52% 5.53% 31.22% 4/28/1942 - 2
1945 - 1948 14.46% 3.32% 28.78% 5/17/1947 - 3
1949 - 1952 74.80% 13.03% 14.02% 7/17/1950 - 2
1953 - 1956 75.65% 13.14% 14.82% 9/14/1953 - 1
1957 - 1960 24.51% 5.68% 20.66% 10/22/1957 - 1
1961 - 1964 45.84% 9.00% 27.97% 6/26/1962 - 2
1965 - 1968 22.55% 4.96% 22.18% 10/7/1966 - 2
1969 - 1972 13.66% 3.16% 34.73% 5/26/1970 - 2
1973 - 1976 -8.97% -2.32% 48.20% 10/3/1974 - 2
1977 - 1980 26.34% 6.03% 19.13% 3/6/1978 - 2
1981 - 1984 23.19% 5.08% 25.85% 8/12/1982 - 2
1985 - 1988 66.06% 11.92% 33.51% 12/4/1987 - 3
1989 - 1992 56.89% 10.64% 19.92% 10/11/1990 - 2
1993 - 1996 70.01% 12.42% 8.94% 4/4/1994 - 2
1997 - 2000 78.24% 13.47% 19.31% 8/31/1998 - 2
2001 - 2004 -8.21% -2.12% 43.46% 10/9/2002 - 2
2005 - 2008 -25.47% -7.09% 51.93% 11/20/2008 - 4
2009 - 2012 91.47% 14.99% 23.22% 3/9/2009 - 1
Averages 33.61% 4.89% 31.55%

Click here for a page showing all of the SPX charts stacked on a single page.

Since 1960 the MDD for the cycle has occurred in year 2 with three exceptions, 1987, 2008 and 2009.

The next table shows data for the NASDAQ composite (OTC) from 1965 - 2012.

Period Total return CAR MDD MDD date
1965 - 1968 137.97% 19.49% 20.79% 10/10/1966 - 2
1969 - 1972 28.07% 6.01% 38.22% 5/27/1970 - 2
1973 - 1976 -26.81% -7.50% 59.90% 10/3/1974 - 2
1977 - 1980 106.38% 16.57% 24.91% 3/27/1980 - 4
1981 - 1984 22.45% 4.94% 31.50% 7/25/1984 - 4
1985 - 1988 54.19% 10.27% 35.89% 10/28/1987 - 3
1989 - 1992 77.50% 13.36% 33.00% 10/16/1990 - 2
1993 - 1996 90.71% 14.90% 16.55% 7/24/1996 - 4
1997 - 2000 91.36% 15.00% 53.79% 12/20/2000 - 4
2001 - 2004 -11.94% -3.13% 61.03% 10/9/2002 - 2
2005 - 2008 -27.51% -7.73% 53.97% 11/20/2008 - 4
2009 - 2012 91.47% 14.99% 23.22% 3/9/2009 - 1
Averages 52.82% 8.10% 37.73%

Click here for a page showing all of the OTC charts stacked on a single page.

Five (45%) of the OTC MDDs occurred in year 2, five (45%) occurred in year 4 and 1 in year 1. Two of the year 4 MDDs in July and just 1 day apart (1984 and 1996).

The next table shows data for the Russell 2000 (R2K) from 1981 - 2012.

Period Total return CAR MDD MDD date
1981 - 1984 35.71% 7.35% 29.16% 8/12/1982 - 2
1985 - 1988 45.81% 9.00% 39.08% 10/28/1987 - 3
1989 - 1992 49.98% 9.63% 34.27% 10/30/1990 - 2
1993 - 1996 64.07% 11.64% 15.59% 7/24/1996 - 4
1997 - 2000 33.35% 6.95% 36.86% 10/8/1998 - 2
2001 - 2004 34.75% 7.18% 37.46% 10/9/2002 - 2
2005 - 2008 -23.35% -6.48% 54.98% 11/20/2008 - 4
2009 - 2012 70.06% 12.43% 33.31% 3/9/2009 - 1
Averages 38.80% 7.21% 38.09%

Click here for a page showing all of the R2K charts stacked on a single page.


This link goes to a page showing multiple indices on log scales on a single chart to enable you to see the relative performance of the indices over the Presidential Cycle.


A closer look at each year of the Presidential Cycle

Click here for a closer look at Presidential Year 1.

Click here for a closer look at Presidential Year 2.

Click here for a closer look at Presidential Year 3.

Click here for a closer look at Presidential Year 4.


The next table shows the average performance of the different indices during each of the Presidential years since 1963 (except the R2K which begins in 1980)
DJIA SPX OTC R2K Percentage of the years the index was up for the year
Year 1 3.3% 3.7% 4.8% 11.8% DJIA 45%, SPX 55%, OTC 64%, R2K 86%
Year 2 1.0% -0.3% -2.57% -1.2% DJIA 55% , SPX 55%,OTC 45%, R2K 43%
Year 3 17.89% 18.63% 38.65% 22.8% DJIA 100%, SPX 100%, OTC 92%, R2K 75%
Year 4 5.6% 6.7% 12.0% 6.9% DJIA 75%, SPX 83%, OTC 75%, R2K 63%
A weak market appears to be tolearable in the 2nd year, but not year 3.

The next table is similar to the previous one except all averages are calculated from 1980.

DJIA SPX OTC R2K Percentage of years the index was up for the year
Year 1 9.3% 9.0% 8.0% 11.8% DJIA 50%, SPX 64%, OTC 64%, R2K 86%
Year 2 6.9% 4.8% 2.9% -1.2% DJIA 71%, SPX57%, OTC 57%, R2K 43%
Year 3 19.1% 18.5% 36.7% 22.8% DJIA 100%, SPX 100%, OTC 92%, R2K 75%
Year 4 2.0% 3.1% 0.6% 6.9% DJIA 63%, SPX 75%, OTC 63%, R2K 63%

The next group of links are to tables showing monthly and yearly perfromance for the index along with 5 period (20 year) monthly performance summaries and overall performance summaries including the percentage of time the month has been up. There is also a breakdown by Presidential Year with summaries.

DJIA 1885 - 2012

Overall the best month for the DJIA is December, up 70% of the time with an average gain of 1.2%. The worst month is September up 46% of the time with an average loss of 1.0%.

Breaking it down by Presidential Year the best month is April of year 3, up 78% of the time with an average gain of 2.9%. The worst month by percentage of up months is June of Year 2 up 31% of the time while the worst average loss is September of year 2 up 45% of the time with an average loss of 1.6%.

SPX 1928 - 2012

Overall the best month for the SPX is also December up 75% of the time with an average gain of 1.5%.

Breaking it down by Presidential Year the month that has been up most often and has had the largest average gain is January of year 3 up 86% of the time with an average gain of 3.5%. The worst months in the Presidential Cycle measured by the percentage of the time they have been up are September of year 1 and June of year 2, both up 33% of the time. The largest average loss has been 2.1% in February of year 1.

OTC 1963 - 2012

Overall the best months for the OTC have been April up 70% of the time with an average gain of 1.7%, and January up 65% of the time with an average gain of 2.9%. The worst months have been July up 50% of the time with an average gain of 0.1% and September up 62% of the time with an average loss of -0.1%.

Breaking it down by Presidential Year the best month is March of year 3, up 100% of the time with an average gain of 3.8%. January of year 3 has been pretty good to up 92% of the time with an average gain of 7.6%. The worst months have been February of year 1, up 25% of the time with an average loss of 4.1% and May of year 2, also up 25% of the time, but with an average loss of 3.0%.

R2K 1979 - 2012

Overall the best month for the R2K is December up 76% of the time with an average gain of 3.0%. The worst month for the R2K has been July, up 47% of the time with an average loss of 0.6%. September and October have also had losses on average.

Breaking it down by Presidential Year, the best months are May of year 1 up 100% of the time with an average gain of 4.3% and March of year 3 also up 100% of the time with an average gain of 3.3%. December of both years 3 and 4 has been up 89% of the time with an average gains of 4.0% and 4.3% respectively. The largest average loss has been -4.0% in July of year 2. May through September of year 2 all have averages losses.