Here’s a nice convoluted chart for you.
Bank of America/Merrill Lynch has compared what are two opposing trends currently intersecting in 2011. The first, that the third year in Presidential cycles are extremely bullish for the S&P 500. The second, that years ending in 1, or the “Decennial Pattern,” are not bullish for the S&P 500.
If you’re completely torn between these two trends, have no fear, BofA Merrill Lynch have sorted it out for you.
From BofA Merrill Lynch:
Going back to 1930, the average price return for years ending in “1” in the Decennial pattern is a negative 1.4%. The “1” years are down 50% of the time. The good news is that when the “third” year of a Presidential Cycle is also the “1” year in the Decennial Pattern, there has only been one negative return going back to 1931. The years that were both Presidential Cycle Year Three and Decennial Year One are 1931, 1951, 1971, and 1991. The S&P 500 price returns for these years are as follows: 1931: down 47.07%, 1951: up 16.35%, 1971: up 10.79%, and 1991: up 26.31%.
If you’re keeping score at home, that leaves a 25% chance of a crash, and a 75% chance of a nice spike for the S&P 500.
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