Optimized Monetary and Calendar Market Timing

In monetary market timing, we saw a system that combines the direction of interest rates and the 4 years of the US presidential cycle. This system called for being completely out of stocks during the year 2 of the presidential cycle.


A reader suggested an improved model by investing in stocks during a specific period of the year 2.

Best 3 months to be in the Stock Market

The following table shows how the Stock Market performed over the last 3 months of the year. The results are provided for every year of the presidential cycle.

Presidential Cycle Year Average Returns Standard Deviation Positive Year Min Return Max Return
1 2.4% 6.3% 77% -9.7% 13.2%
2 8.4% 7.2% 86% -6.1% 24.5%
3 2.9% 8.4% 71% -21.8% 13.4%
4 3.4% 5.0% 93% -10.7% 8.4%
S&P500 returns from 1st October to 31st December (Dividends excluded)

Can you see the returns in year 2 ? Just investing over the last 3 months of the year provides truly outstanding returns: the average returns are greater than the standard deviation.


For comparison purpose, below is recalled how the S&P500 performed when investing over the entire year.

Presidential Cycle Year Average Returns Standard Deviation Positive Year Min Return Max Return
1 3.8% 18.6% 46% -18% 32.3%
2 5.9% 22.4% 50% -28.1% 47.3%
3 18.7% 8.7% 100% 3.9% 35.2%
4 8.7% 10.3% 86% -11.8% 28.9%
S&P500 returns from 2nd January to 31st December (Dividends excluded)


Now, we have a plan for investing in year 2 of the election cycle and can complete our optimized model.

Optimized Monetary and Calendar timing

The only modification from the original model is in Year 2.

- Year 1: invest in stocks if interest rates were dropping 12 months ago
- Year 2: invest in stocks from October 1st to December 31st
- Year 3: invest in stocks
- Year 4: invest in stocks


Presidential Cycle Year Condition Average Returns Standard Deviation Positive Year Min Return Max Return
1 Decreasing Rates 6.4% (*) 13.5% 91%-12.3% 32.3%
2 1st Oct - 31st Dec 8.4% 7.2% 86% -6.1% 24.5%
3 Entire Year 18.7% 8.7% 100% 3.9% 35.2%
4 Entire Year 8.7% 10.3% 86% -11.8% 28.9%
Total   10.7% 11.2% 90% -12.3% 35.2%

(*) The returns for Year 1 are 0% when interest rates are increasing, hence the seemingly low average returns.


This system beats Buy and Hold and other timing systems. You can check the market timing performances summary for a comparison of returns.


Finally, check Stock Picking & Market Timing to see how you can further improve your investment returns by combining Stock Picking and Market Timing.

Go Back to Top