Markets During Presidential First Terms

Sy Harding (who you may know from his prescient 1999 book Riding the Bear) had an interesting piece in Barron’s over the weekend.

Sy wrote:

There’s a strong tendency for each new presidential administration to do whatever it takes to make sure the economy and market will be strong when reelection time rolls around four years later. As the table below shows, of the 19 bear markets since 1917 — I define a bear market as one in which stocks fall at least 20% — 15 ended in the first or second year of a presidential term, so that the economy and stock prices had recovered by the time the next election took place. . . .

The sole president who didn’t see the bear depart until his fourth year in office was the unfortunate Herbert Hoover, who wasn’t re-elected. So, the odds seem good that the current bear market will conclude in the first or second year of the Obama presidency.”

15 of 19 seems like not bad odds, and if you look at the last 4 — 3 of them came during a president’s second term.

Statistically speaking, 2010 looks like a pretty good bet for the end of the Bear market, according to Harding. One caveat: Just because the Bear ends doesn’t mean a new bull starts right away.

My 1973 thesis is still playing out according to schedule, which puts us now somewhere in 1974. Even when the bear was dead, markets still needed another 7 years for a new bull to begin . . .




Thank You, Mr. Obama
Barron’s April 25, 2009

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