Presidential history suggests you put your money into stocks now—here’s why
Of course, theory and reality don’t always match up
John Maynard Keynes, the architect of the 20th century’s leading economic theory and a top investor, once said, “Successful investing is anticipating the anticipations of others.”
What he meant was, no matter how far-fetched a theory driving investor behavior seems to you, if it’s moving the market, you should use it to your advantage.
Case in point: the presidential election cycle theory.
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The presidential election cycle theory posits that the stock market behaves in a predictable manner over the course of a U.S. president’s term in office.
The market does worse in the first two years of the term, when the president is pushing through all his most painful policies and pandering to the special interests that got him elected.
In the third year, the market picks itself back when the president turns his full attention to boosting the economy to get re-elected.
Then the market falls off again in the fourth year as jitters about the election depress returns.