The 4-Year Presidential Election Cycle and the Stock Market
Key Points – The 4-Year Presidential Election Cycle and the Stock Market
- Breaking Down the Presidential Election Cycle Theory
- Does History Back Up the Presidential Election Cycle Theory?
- There Are Many Factors More Important Than Rate of Return
- 7-Minute Read
The Relationship Between the 4-Year Presidential Cycle and the Stock Market
What’s in store for the remainder of 2026, and what lies ahead in 2027 and beyond? Those two questions may have crossed your mind for several reasons in recent weeks, whether it pertains to your family, job, community … the list goes on. One thing that makes 2026 unique is that it’s a midterm election year. Along with wondering what candidates will win, there’s always speculation about how the stock market will perform heading into the second half of a presidential term. So, we’re going to examine the relationship between 4-year presidential cycle and the stock market.
We want to be clear that we’re not here to tell you who you should be voting for in November’s midterm election. Regardless of which side of the political aisle you tend to be on, we simply want you to understand what history has to say about the 4-year presidential cycle and the stock market.
The Presidential Election Cycle Theory
The presidential election cycle theory focuses on stock market performance throughout a 4-year presidential election cycle following a presidential election.1 The theory was created by the inventor of the Stock Trader’s Almanac, Yale Hirsch, who passed away in 2021.2,3 The inaugural edition of the Stock Trader’s Almanac was published in 1967, one year before Richard Nixon defeated Hubert Humphrey to become the 37th president of the United States.4 Hirsch’s legacy lives on, as his son, Jeffrey, now serves as the editor-in-chief of Stock Trader’s Almanac.5
Yale Hirsch’s Reasoning on the 4-Year Presidential Election Cycle and the Stock Market Theory
Yale Hirsch’s research showed that the stock market’s lowest returns during a 4-year presidential election cycle tend to come in the first year of a term. Returns then improve in the second year and the third year before dipping in the final year of the term. The 4-year presidential election cycle and the tracking of stock market performance then start over even if the incumbent is reelected.
After the president gets elected, their focus is generally geared toward their principles and proposed policies that helped them get voted into office. But once they begin to gear up for reelection, the president’s focus typically shifts toward improving economic conditions to increase their chances of being reelected. In turn, stock market performance tends to improve during the second half of a presidential term.
Does History Back Up the Presidential Election Cycle Theory?
Does the presidential election cycle theory seem sound to you? We want to see if history agrees with it and what other nuances there might be in the relationship between the 4-year presidential cycle and the stock market.
We looked at the average returns for the S&P 500 since 1950 and Dow Jones Industrial Average since 1896 and to help determine the average return for post-election, midterm, pre-election, and election years.6,7 The Stock Trader’s Almanac has used the DJIA data since 1896, but we wanted to include the more recent data set from the S&P 500 as well.
S&P 500 Average Returns since 1950 for Post-Election, Midterm, Pre-Election, and Election Years
| Post-election year | 6-7% |
| Midterm election year | 5-6%* |
| Pre-election year | 16-17% |
| Election year | 7-8% |
Dow Jones Industrial Average Average Returns since 1896 for Post-Election, Midterm, Pre-Election, and Election Years
| Post-election year | 3% |
| Midterm election year | 4% |
| Pre-election year | 10.2% |
| Election year | 6% |
Across both datasets, the ranking is the same regardless of exact figures. Historically, pre-election years have stood out relative to the other years during the period analyzed, election and post-election years land in the middle single digits to high single digits, and midterm years are consistently the weakest.
Keep in mind, though, that these are small samples (18-25 observations depending on the study). The ranges within each bucket are wide, and past patterns like this are descriptive, not predictive.
Why Do Midterm Years Tend to Lag When It Comes to Stock Market Performance?
Back in December 2025, Jeff Hirsch joined Dave Keller, CMT of Sierra Alpha Research LLC on Keller’s The Market Misbehavior Podcast. On the episode, Jeff gave a preview of the 2026 Stock Trader’s Almanac and discussed his research on the 4-year presidential election cycle and the stock market, including recent poor performance in midterm years.8
“The thing about the midterm year is it’s the one that’s remained weak over many different timeframes—the long-term timeframes and the short-term timeframes. It still has this negative connotation, and it has to do with politics, fiscal policy, and what the incumbent administration is doing to retain Congress or get it back or minimizing the thinning of their majorities, however thin they might be.” – Jeff Hirsch
Looking Back at the Last 75 Years
Let’s look at some other data that was analyzed by U.S. Bank investments strategists following the 2024 presidential election to get more informed and see some other nuances in the relationship between the 4-year presidential cycle and the stock market.9
The U.S. Bank investment strategists’ research consisted of reviewing stock market performances from the past 75 years and patterns that persisted across 4-year presidential election cycles. The strategists looked at the average three-month returns after every presidential election over that period. Then, they looked at the average three-month returns over the last 75 years altogether.
When comparing those averages, the strategists utilized something called a t-statistic (t-test) to understand any potential correlation between what party has control in the White House and Congress and returns in the stock market.10 The purpose of the t-test is to figure out if party control has a significant impact on stock market performance.
What Has Happened to the Stock Market When Party Control Changes?
When breaking down the relationship between the 4-year presidential cycle and the stock market, one particular area of interest is what happens to the markets when one party has control of the White House and Congress. Do you think that one party controlling the White House and Congress leads to stronger stock market performances?
There is oftentimes a lot of hype about that possibility, whether it’s Republican or Democratic control, but the data that the U.S. Bank strategists doesn’t back that up. Let’s look at some scenarios of stock market returns when party control has been split.
| Scenario | White House Control | Congress Control | Outcome | Average 3-Month S&P 500 Return During Period | Statistically Significant (>95%)? |
| 1 | Democrats | Democrats | Democrats | 0.02% | No |
| 2 | Democrats | Republicans | Divided | 1.67% | Yes |
| 3 | Democrats | Split | Divided | 1.75% | Yes |
| 4 | Republicans | Democrats | Divided | -0.99% | Yes |
| 5 | Republicans | Republicans | Republicans | 0.49% | No |
| 6 | Republicans | Divided | Divided | -0.67% | No |
| 7 | All one party | 0.15% | No | ||
| 8 | All divided | -0.10% | No |
During the period analyzed, the data show that periods with Democratic control of the White House and Republican control of Congress were associated with positive absolute returns that exceeded the long-term average. The same goes for when there has been Democratic control of the White House and split party control within the House and Senate. On the flip side, there have been positive absolute returns modestly below long-term average when there has been Republican control of the White House and full Democratic control of Congress.
Frequently Asked Questions About the 4-Year Presidential Election Cycle and the Stock Market
Q: What Is the 4-Year Presidential Election Cycle Theory?
It’s the idea that the stock market tends to follow a predictable pattern across each four-year presidential term, with returns typically starting weaker in the first year or two and building to a peak before the next election. The theory was popularized by Yale Hirsch, who founded the Stock Trader’s Almanac in 1968.
Q: Why Does the Theory Say Returns Improve as a Term Goes on?
Hirsch’s reasoning was less about the market and more about politics: a new administration tends to spend its first year or two implementing policy, which can create uncertainty for markets. As the next election approaches, the sitting president typically shifts focus toward strengthening the economy to help their (or their party’s) reelection chances, which the theory says tends to support stronger market performance.
Q: Which Year of the Cycle Has Historically Had the Best Returns?
The third year of a presidential term (the pre-election year) had the highest average S&P 500 and Dow Jones Industrial Average returns. The S&P 500 has averaged between 16-17% during pre-election years, while the DJIA has averaged 10.2%.
Q: Does That Mean the First Year of a New Term Is Always Weak for Stocks?
Not necessarily. While Hirsch’s theory predicts a slower start, the data doesn’t always bear that out.
Q: Does It Matter Which Political Party Controls the White House or Congress?
Based on a 75-year review by U.S. Bank strategists, no. The analysis found no statistically significant relationship between which party held the White House or Congress and how well the stock market performed. Unified party control didn’t produce reliably better returns than divided government.
Q: Should I Change My Investment Strategy Based on Where We Are in the Presidential Cycle?
We don’t recommend it. Trying to time the market around the 4-year presidential cycle isn’t advisable. Broader factors such as inflation, interest rates, corporate earnings, and overall economic conditions tend to have a far greater influence on market performance than where a president happens to be in their term.
Q: What Should Investors Focus on Instead of Election-Cycle Patterns?
A comprehensive financial plan built around your own goals, time horizon, and risk tolerance, not around the political calendar. Elections come and go, but a disciplined, long-term investment approach may help with guiding investors through various phases of the cycle.
Other Factors to Consider Besides Stock Market Returns That May Impact Your Financial Decisions
With November’s midterm election coming up, there figures to be many more headlines (pre-and post-midterm election) about the potential implications of the results. Some of them might even be about the 4-year presidential cycle and the stock market.
However, there are many things that tend to impact stock market returns more than election results. Some of those factors include inflation, interest rates, and the economy. Additionally, it’s important to remember that rate of return also isn’t the end-all-be-all with retirement planning either. Other factors to consider include:
- Risk
- Taxes
- Inflation, Interest Rates, and Economic Health
- Time
- A Life Plan with Goals for Retirement
To gauge your retirement readiness and learn more about other factors that may impact your retirement, download our Retirement Plan Checklist below. It includes a timeline of planning considerations leading up to retirement, age-based milestones to consider, and a 30-question checklist.
Have Any Questions About the 4-Year Presidential Election Cycle and the Stock Market?
All the noise that typically leads up to midterm and presidential elections can oftentimes create economic uncertainty. Finding a way to eliminate that noise is critical so can be able to enjoy today with confidence for tomorrow.
The data we shared on the relationship between the 4-year presidential election cycle and the stock market is purely intended for educational purposes. Trying to time the market based on where we’re at within the 4-year presidential election cycle isn’t advisable, as there are many other factors that can impact the markets, and more importantly, your retirement.
If you have any questions about the 4-year presidential election cycle and the stock market or other factors that could potentially impact your financial confidence, let us know. Get started by getting your Modern Confidence Score below. Our team will then be in touch with next steps about building a connected financial plan to help you build financial confidence through our Advantage Offerings: tax, estate, investments, insurance, and financial planning.
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We hope all is well with you throughout this midterm election year. No matter what side of the political aisle you’re on, we’re ready to build a financial plan that helps you work toward your objectives while considering a level of risk appropriate for your circumstances.
Resources Mentioned in This Article
[1] https://www.investopedia.com/terms/p/presidentialelectioncycle.asp
[2] https://www.stocktradersalmanac.com/Index.aspx
[4] https://www.britannica.com/event/United-States-presidential-election-of-1968
[5] https://www.stocktradersalmanac.com/AboutUs.aspx
[6] https://fractalcycles.com/guides/presidential-cycle-stock-market
[7] https://www.sofi.com/learn/content/presidential-election-cycle-theory/
[8] https://youtu.be/0i2HW1COOS0
[10] https://www.investopedia.com/terms/t/t-test.asp
Historical market patterns are provided for informational purposes only and may not persist.
Investment advisory services offered through Modern Wealth Management, LLC, a Registered Investment Adviser.
The views expressed represent the opinion of Modern Wealth Management, a Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.
Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action. Before investing, consider investment objectives, risks, fees, and expenses. Investments in securities involve the risk of loss, including loss of principal. Past performance is no guarantee of future returns. The views and opinions reflected in the content are subject to change at any time without notice. The content speaks only as of the date indicated. Some information was obtained from external sources. The information is believed to be accurate, but there is no guarantee that it is.