Election Year Cycles - What To Expect

Every election year over the past five US Presidential election cycles has presented a unique set of price rotation events. Particularly evident in strongly contested US Presidential candidate battles where the voters are consumed with pre-election rhetoric. The 2007-08 election cycle was, in our opinion, very similar to the current market cycle in terms of consumer sentiment and economic function. The 2015-16 election cycle was less similar, yet still important for our researchers.

The economic conditions of the US economy and the global economy were vastly different prior to each US Presidential election cycle and continue to evolve throughout the current 2020 election cycle. Yet, our researchers believe the correlation of price volatility and rotation combined with the distraction for consumers as the election process occupies the hearts and minds of almost everyone across the globe takes a toll on the markets. Prior to almost any US Presidential, price volatility and trends tend to become much more exaggerated and extended.

We’ve published research articles about this technical setup/pattern that occurs in the markets nearly 8 to 15+ months before the US Presidential election cycle before. The basic theory of the setup/pattern is as follows…

  • 12+ months prior to the election date, the parties consolidate around specific candidates where the first battles of the US presidential election cycle conclude.
  • Over the next 12 months, the battle between the selected candidates becomes more heated and aggressive as voters are pushed information and disinformation related to their decisions.
  • The process of the election and the decision-making process for consumers/voters is very stressful and distracts from the normal economic activity for many. This distraction translates into an indecisive market where future expectations (optimism and pessimism) greatly depend on the outcome of the election. Thus, the markets are stuck in a “no man’s land” type of “stasis” waiting for the election event to conclude.

Depending on the events that lead up to the election date, the stock market could be biased towards a bullish trend or a bearish trend which can have a big impact on the pre and post-election outcomes.

S&P 500 Index 2006-09 US Presidential Election Cycle

Let's start by taking a look at the 2006-09 (2008 US election cycle) data/chart. Continue reading "Election Year Cycles - What To Expect"