The third year of a presidential term brought the best performance for the S&P 500

In US history, the third year of a presidential term has been the most favorable for the US stock market, which may be due to policies adopted in those years to stimulate the economy ahead of the next election, according to an analysis visualcapitalist.com, based on PinPoint Macro Analytics data.

The quoted source analyzed the average annual evolution of the S&P 500 stock market index in presidential cycles, starting from November 1980 (the last year Jimmy Carter was president).

The study highlights that in the first years of the presidential mandate, the average dynamics of the index was 6.7%, in the second - 6.8%, in the third - 13%, and in the election year - 2 .4%. Thus, the election year is often the weakest for the evolution of the S&P 500, which, according to the quoted source, could be caused by the increased political and economic uncertainty before the elections, which weakens investor confidence.

• Past performance is not indicative of future results

Analyzing historical averages does not necessarily predict the future, according to the source, who notes that there are also many factors that determine market performance, factors independent of US government policies.

For example, the performance of the S&P 500 during the four years of Biden's presidency, which shows that each year of his tenure was significantly different from the historical average. Thus, in 2021, the first year of the mandate, the index increased by 28.7%, in the second it decreased by 18.1%, in the third it increased by 26.3%, and in the fourth, the currently, it has gained 22.8% (through October 28).

The analysis highlights that 2021 performed better amid low interest rates and stimulus related to the Covid pandemic, while 2022 underperformed as the Federal Reserve (Fed) began aggressively raising interest rates to fight inflation . Then, 2023 and 2024 were two very strong years for the S&P 500, thanks to the rally in the technology sector, centered on artificial intelligence.