Sunday, May 16, 2010

A Look At The Market Around The Presidential Election Cycle

I have noted in the past that the market, the Dow Jones Industrial Average ($INDU) in this case, tends to follow a pattern around the presidential election cycle. It is believed tougher economic policy is followed early in the presidential election period if necessary. The hope is the economy will recover in time to re elect the party that is in power. If the market follows this same pattern, a sideways trend may be the norm until the 4th quarter of this year with a stronger advance in the pre-election year period.

Given the extent of potential tax increases in 2011 and sovereign debt issues, a strong market advance is not assured next year. In this environment, an investor should consider constructing the foundation of their investment portfolio in high quality companies.

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