Are presidential election years bullish for stocks?

— -- Q: What can we expect of the market in a presidential election year based on historical patterns?

A: Voters will get their chance next year to show what they think of President Obama. But investors may not have to wait that long to see what Wall Street's perspective on the election will be.

Presidential election cycles have traditionally had a powerful influence on the direction of stocks. It stands to reason. After all, a nation's economic policy can change dramatically after a rotation of leadership. Tax rates, budgetary decisions and investment policy can all hinge in large part on decisions and beliefs made by a country's leadership.

And for all these reasons, investors pay very close attention to emerging trends every four years during presidential election periods. And luckily, history has created a very clear pattern for investors to analyze.

For one thing, the tail end of presidential election years tend to be pretty bullish for stocks most of the time, no matter which candidate eventually wins, says the Stock Trader's Almanac. The Standard & Poor's 500 has risen in the final seven months in 13 of the past 15 presidential election years since 1950, Stock Trader's Almanac says.

What about the first five months of the year during a presidential election? That depends on which candidate ultimately wins, something investors wouldn't know until November. An historical analysis looking at past election years and how stock prices reacted, when the political party currently in power has won the election, which happened 16 out of the past 27 elections since 1901, the Dow Jones industrial average has risen by 1.5% on average in the first five months of the year before the election. Compare that to when the Party was ousted, and the Dow lost 4.6% on average in the first five months of the year before the election, the Stock Trader's Almanac says.

And generally, investors haven't had to suffer big losses during election years. Election years are the second best years, on average, during the presidential election cycles. During election years, stocks have only fallen, by more than 5%, on six occasions, the Stock Trader's Almanac says.

All this history lesson is very interesting. But there's a huge caveat investors must be aware of. These statistics describe what has occurred in the past. And there's no guarantee that any of these patterns will continue in the future.

In fact, just recently, several of the trends failed to materialize. For instance, the year 2000 was one of the rare times when an election year delivered a loss to investors based on the S&P 500 (the Dow Jones industrial average did gain in 2000), says the Stock Trader's Almanac. That was the year when the results of the presidential election were delayed. Another example occurred in 2008 when investors suffered one of the worst bear markets on record, despite it being an election year.

So while it's fine to make projections considering what's happened in the past, it's a mistake to count on history repeating itself exactly.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz