Figure 1 – Graph showing quarterly performance between 1902 and 2006 for each election year. Year 1 is the post-election year and year 4 the election year. As you can see the pre-election year (2007) handily outperformed the others. By only being invested for the five quarters from Q4 of the mid-term year to the end of the pre-election year, the hypothetic election trader would have captured 104% of the total gains in the average four-year election cycle.

Table 1 – Each year is color coded for the election year showing Dow quarterly performance in each. We also included performance in all years for comparison purposes. Note that worst quarter is Q3 of the mid-term year which is followed by the second best quarter over the four-year cycle.