Bear Markets and The End of Two-Term Presidencies – Also, Bernanke Dooms the Markets

It occurs to me that the last two times the US has entered the final year of a two term Presidency, the stock market has crashed.  Stocks made a high in March 2000, 8 months prior to the voting that elected Bush W.  Then they ground lower until March 2003 when that same W shared the stage with the UK’s Tony Blair to announce war with Iraq.  They then made a high in October 2007, just over a year prior to the vote that led W out and Dear Leader in.  The low was in March 2009, 2 months after Dear Leader was sworn in.  Will the high in July 2015, just 16 months prior to the blessed end of Obama’s relentlessly lying reign, also signal a drop of 50% form those highs sometime in the next year or two?

Well, one thing that happened in the run-up to the mortgage crisis that comprised the last bear market and financial crisis is that one Ben Bernanke, academic idiot savant, said that “the problems in the subprime market seem likely to be contained”.  A year after he said this in the speech on the Federal Reserves own web site, Bear Stearns collapsed and 6 months after that, Lehman Brothers.  Lately he has been at it again.  These days, the credit bubble of the day is in China, and it is an order of magnitude larger even than the subprime crisis that almost stopped the world.  Apparently Helicopter Ben said (thanks to Mish) “Bernanke also said the $28 trillion debt pile facing China was an ‘internal’ problem”.  Seriously.  Which of course means that it isn’t internal, but will likely lead to the end of the financial world as we know it.  Or something like that.  In any event it will be a large problem not contained solely to China.

Getting back to the stock market tanking at the end of two term presidencies, does the pattern hold further back than 2000?  Well the one before that was the transition from Reagan to Bush the Elder in 1988.  The market had its biggest one day decline about 13 months prior to that election and then an echo crash in 1989 less than a year after the election.  So I think that fits the pattern.  Prior to that maybe Nixon second term?  Well technically his second term ended in 1976, but he resigned in 1974 to avoid his impeachment.  The markets crashed in 1973-74 so I do not know if that really counts or not, but his second term ended right then so sort of.  The only semi-modern presidency of two term prior to that was Eisenhower.  The election that ended his second term was in 1960 when Kennedy was elected to succeed him.  The market went sideways to down in 1959 to 1960.  So sort of but not a big crash like the most recent 3 and now 4.

S&P500

Comments are closed.