Riding The 4-year Cycle

Article Excerpt

If the market is going to run into serious trouble, it often does so in the first half of a four-year Presidential term. Our last Presidential election was in November 2004. That made 2005 and 2006 the years when investors needed to watch out. Several times since the fall of 2004, after a market downturn, investors wondered if we had entered a bear market — a falling trend that lasts one to three years and knocks 20% or more off the market indexes. Many investors are especially wary of the next bear market, since the last one was so lengthy and deep. That bear market began in mid-2000 and ended in the winter of 2002/2003. It was extremely costly for investors who made the common mistake of loading up on Internet and tech stocks. This time, however, we don’t have that degree of over-valuation as a danger sign. Stocks in general are reasonably priced. No particular market segment shows signs of excessive speculation. Interest…

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