Core Insights - The second year of a presidential term is historically the weakest in the four-year cycle according to the "Presidential Election Cycle Theory" [2][8] - Early reactions to new policies and political uncertainty before midterm elections contribute to weaker performance in the first half of a term, while efforts to boost the economy typically help returns in the second half [3][4] - Bank of America analysts suggest that historical trends indicate market underperformance this year, with a potential for stronger performance in 2027 [4][8] Historical Performance - Since 1940, the S&P 500 has averaged a 4.2% increase in the second years of presidential terms, compared to an average annual gain of about 9% over the full period [5] - Analysts noted that most relative pressure could occur leading into midterms, although a potential "Santa Claus rally" in Q4 2026 could lift markets [5][6] - The current target for the S&P 500 at the end of 2026 is set at 7100, suggesting a return of approximately 4% for the year, which is below the long-term average [6]