Jeremy Grantham & the presidential cycle

From Grantham’s January newsletter:

After a timeout, back to the meat grinder!

Let’s start with that irritating factor, the Presidential Cycle, so simple sounding that no one in the fee charging business can afford to be associated with it. And
that is presumably why it continues to work. The important fact here – see Exhibit 1 – is
that for 7 months of the Presidential Cycle, from October 1st of the second year (this cycle, 2022) through April 30th of the third year (2023), the returns, since 1932, equal those of the remaining 41 months of the cycle! This has a less than one-in-a-million probability of occurring by chance, pretty remarkably, and it has been about as powerful in the last 45 years as the previous 45 years. We are now in this sweet spot, which once again is up nicely so far… Suffice it to say that this positive influence may help to support the market for a few more months.

Noting that the market low last year was on October 13th


Not true in 1947 - 48

Buyer beware

Weekly Chart

The statistic covered the period since 1932, so the '40s were included.

That said, FDR was re-elected (again) in 1944, so the second year of that cycle would be 1946 with 1947 being the third.


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Fair enough at first.

The problem though with the statistics in that study, the 2022 market drop wont recover. It will echo the 1947 to 1950 down turn.

Of course we are in a wait and see.

The reasons are the normalization of banking operations and interest rates, along with counter cyclical economics offsetting when economic reactions appear.

In the prior examples that hold true in this theory there were not the same counter cyclical forces built up as much. We had not entered this later long wave.

For this cycle, being in SPY for the seven months would have had you up 18%.


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Good luck with this approach.

It is not my thing.

Yes, I wouldn’t expect to find you on the Mechanical Investing board.


Glad it does something for you.