What Politics Can Tell Us About Markets: Ritholtz Chart

Barry Ritholtz is a Bloomberg View columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He blogs at the Big Picture and is the author of “Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy.”
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Bank of America Merrill Lynch took a look at the presidential-election cycle and found that, on average, the second year is rather weak:

2014 is the second year of the Presidential Cycle. Year 2 on average has a mild rally into April, a pullback into September, and then a strong rally into yearend that carries well into the Presidential Cycle Year 3. If the US equity market follows the Presidential Cycle in 2014, there is a potential selling opportunity in April/May and a potential buying opportunity in September/October. The sweet spot for the Presidential Cycle is from a September mid-term year low through August of Year 3.

If the pattern holds -- and it looks like it will -- the traders among you will have a better buying opportunity later this year.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

(Barry Ritholtz writes about finance, the economy and the business world for Bloomberg View. Follow him on Twitter @Ritholtz.)

To contact the author on this story:
Barry L Ritholtz at britholtz3@bloomberg.net