Indicator of the Week: The Third Year in Presidential Cycles

Relative to other third years of presidential cycles, the first half of 2015 has been a disappointment for the SPX

Senior Quantitative Analyst
Jun 24, 2015 at 7:00 AM
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There's just one week to go before 2015 is halfway over, and the S&P 500 Index (SPX) is up just over 3% on the year. That's not all that exciting, but it's not dreadful over a six-month period. However, remember that this is the third year of a presidential cycle. Returns during these years have typically been astounding. The table below breaks down the SPX returns since 1949 for each year in the presidential cycle. The third year is head and shoulders better than any of the other years. It averages a gain of 17% and has been negative just one time in 16 returns. Furthermore, the one down year was 2011, when the index was essentially even, slipping a mere 0.003%.


1st Half vs. 2nd Half: The table below summarizes the SPX returns for the first half and second half of the year for each of the presidential cycle years. In the third year of the cycle, the heavy lifting is typically done in the first half of the year. The first half averages double-digit returns, and has been positive every single time (16 years). The second half returns are pretty much in line with the other years. As far as these years go, this year seems to be a very sub-par year.


Finally, this last table shows the first-half, second-half, and full-year returns for the SPX for every third year of the presidential cycle since 1949. How bad is the current year's return compared to these? As far as the third year of a presidential cycle goes, this has been the worst first half of a year since 1951.


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