President Warren G. Harding's four-year term led to a near-perfect stock
market configuration. Although he died in office the economy and stock
market bull prevailed despite the recession that was underway at the time
of his death. Although the Tea Pot Dome scandal marred his
administration, the bad guys were arrested. He could be thought of as a
great president, as his promise was to return the country to normalcy. In
essence, he was going to attempt to do what all great politicians do; that
is, undo prior political damage.
This is the third consecutive post election
year where the market found bottom in 1921. That phenomenon is typically reserved
for the mid-term election year.
The DJIA Index is congruent with presidential
election cycle historical standards with market falling in the post
election year of 1920. After eight years with an egomaniac, such as
Woodrow Wilson, it took quite a bit of time to overcome the psychological
impact of Wilson's lunacy. Also, without any disrespect to President
Harding, the stock market and economy enjoyed bullish fervor due to the
weakening political influences following his death.
The stock market found bottom ahead of
schedule late in the post election year of 1921. The mid-term election
year of 1922 was uncharacteristically bullish. The pre-election year of
1923 was incongruent with historical standards while the election year,
1924, performed as expected.
As you can see,
the stock market bear coincided with the start of the 1923 recession, as
it did not deliver bearish expressions six to nine months ahead of this
recession. The stock market bear was not enthusiastic as the economic mood
was still enjoying the escape from Woodrow Wilson's control freak nature.
As you can see, bullish seasonality (pink) is
incongruent to historical standards during the bearish market periods and
bearish seasonality (white) is also incongruent to historical standards
during bullish periods.
