On this page, we study the effect of the presidential cycle and political parties and their effects on stock market performances. The data is from 1928 to 2023, and updated daily.
As shown in the table below, the market indeed performs the best during the third presidential year of a four-year term. The average gain of the third presidential year is 13.96%. The second best year is the fourth presidential year, with an average gain of 7.38% . The worst year is the second presidential year, with an average gain of just 3.33%. On average, the market has gained 7.82% a year since 1928.
Average annual gains in different presidential years and political parties (%) since 1928
Democrat Republican Average
Year 1 12.89% -0.76% 6.63%
Year 2 3.70% 2.89% 3.33%
Year 3 15.42% 12.23% 13.96%
Year 4 9.39% 5.21% 7.38%
Average 10.35% 4.90% 7.82%
The table also shows a much higher average gain when a Democrat is in the White House. On average, a Democratic president sees an average annual return of 10.35%, while a Republican president just sees an average gain of 4.90%. The third year of a Democratic president would see the highest gains, with the annual average of 15.42%. Among the different combinations of political parties and presidential years, the third years with Democratic presidents see the best returns, followed by the third years with a Republican president. The worst years are the first years with a Republican president.
Out of the last 97 years, there were 65 positive years, or 67%. These are the percentages of the years that have seen positive returns. Again the third years stand out with more positive returns. A first year with a Republican president did the worst.
