Here is a test for all of you re: the "sell in may" saying:
If you were to divide all of the historical, 4-year presidential cycles up into 8, 6-month periods... one of those 8, 6-month periods stands out in a HUGE way in terms of how it has historically out-performed the other 7 in terms of stock market performance in the US.
The test is:
1. Which 6 month period out of the 8 is the overwhelmingly strong one?
Ortho nailed #1 above. The strongest is the first 6 months of the 3rd year of the presidential cycle.
Sorry to say that he doesn't agree with conventional wisdom on #2. The primary reason is that Americans prefer "divided government", and since the midterm elections almost always add congressional seats for the party that is out of power in the presidency, the results of mid-term elections are typically bullish for the markets. The more seats are gained by the minority party... particularly if the president is un-popular... the better correlated it is with market strength in the ensuing 6 month period.
The 20th amendment to the U.S. constitution requires a presidential election to take place every four years, which turns out to be all years that are divisible by four (e.g. 2004, 2008, and 2012). The president assumes office the following January after the election. Once presidents take office, they realize that to get reelected they must try to make the economy as healthy as possible four years later. It is this consistency in the U.S. political process that also sets into motion fiscal policies that are frequently predictable and that often have a direct effect on the stock market. In the discipline of economics, fiscal policy is defined as an increase or decrease of taxes and or government spending. The direction that fiscal policy takes can often be directly related to the state of the economy at the time a new president is elected.
It is not surprising to see incumbent presidents push for votes by proposing tax reductions and or increasing spending on specific government programs as an election draws near. In addition, an incumbent political party may also try to persuade the Federal Reserve to complement the administration’s efforts through monetary policy, by increasing the money supply and reducing interest rates. Such fiscal and monetary policies may be introduced as early as the end of the second year of the presidential four-year term. If the results are favorable and the economy responds positively, corporate profits usually rise, and with them, stock prices—just in time for the next presidential election.
It looks like the 1st half of the third year was the best historically. IMO it's because it takes a couple of years for the presidents policies to come to fruition. You could relate that scenario to LVS in that we will start to see the true effect of all of the recent activity in the coming quarters