Reelections And The Presidential Cycle by Koos van der Merwe
How’d They Do?
What happens to the markets when a US
President is elected for a second term?
My article “The Kondratieff Wave And The Presidential
Cycle” was published in July 2012. At the end of
it, I concluded that “with the K-wave suggesting a rise into
2016, the pattern suggests that President Obama will be
reelected.” It is gratifying to know that technical analysis
and the cyclical pattern can predict the future. But to be
honest, I hedged my bets with this statement:
Although the relationship between the Presidential election
cycle and the stock market appears to be strong, it does not
mean that the play will be the same every cycle. However,
when combined with technical analysis, additional insights
can assist investors in their investment decisions.
Keeping that in mind, looking at the Presidential cycle in
closer detail bears study. Why, for example, did the market fall the week after President Obama was reelected? Was
this correction forecast by the Presidential cycle? Surely,
the Dow Jones Industrial Average (DJIA), the Standard
& Poor’s 500, and the NASDAQ should have continued
rising as forecast by the Kondratieff wave. Surely those
Republicans who bought shares betting on a win by their
candidate would not have sold their shares indiscriminately
without looking at the technicals first?
The Presidential cycle
To figure out all these unknowns, a closer study of the
Presidential cycle is necessary. I have also added the
Federal Reserve chairmanship cycle to the chart to see if
this cycle has any bearing on the movement of the market.
Figure 1 shows the Kondratieff wave updated, with an
overlay of the S&P 500 to November 18, 2012.