The perils of a presidential election

There is an obvious relationship between politics, the economy and financial markets. Politics influences expectations and thereby affects investment decisions, both in real goods and financial assets. We can find some examples of statistically significant relationships between the election cycles and the economy and financial markets. For example, looking at data since 1948, the S&P 500 has never fallen in the third year of the presidency and has fallen only once (modestly) in the final year.


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