“This article in the Financial Times points out the excellent statistical record of stock market returns for the coming three calendar quarters, based on the US Presidential cycle. In addition, 2015 is the fifth year of the decade and fifth years have a record of producing very strong returns, in the US markets at least. Let's hope the statistics continue to work in investor's favour over the next nine months.”

David Fuller's view

Many thanks for this interesting email and article.

Veteran subscribers may recall that I have sometimes commented on this over the decades, although not recently so this is an opportunity to do so.  Historically, as I recall, the mid-term low tends to be followed by the best rallies when a first-term president has effectively cleaned the Augean stables during the first half of his administration, of excesses created by the previous president.  That often produces a mid-term setback and the president can then claim responsible governance before gunning the economy in the long run-up to the next election. 

I do not think it is much of a factor today, because we have a second-term president who is more concerned with his legacy than helping to elect Hilliary or whomever.  Also, we have not had a market dip of any consequence which would lower valuations during the first half of Obama’s second term, thanks to QE. 

Looking ahead, what counts most in my opinion is that monetary policy from the Fed is still accommodative, thanks to low interest rates, albeit less so than it was because QE will be ended next month.  The second most important factor will be supply versus demand, which gets its next real challenge with Alibaba’s float.  Nevertheless, the upside gets the benefit of the doubt while US stock market indices remain in clear overall upward trends, as we can still see from the S&P 500 Index.