Dear Members,

In addition to our regular monthly Tactical Market Outlook, we may occasionally send a Tactical Market Brief whenever there is a timely market topic, historical perspective, technical observation, or educational discussion that we believe will help you better understand the current investment environment.

These brief reports are not intended to replace our monthly outlook or serve as trade alerts. Rather, they provide additional insight into the factors that influence the financial markets and the technical analysis that guides our investment decisions.

Today's Tactical Market Brief examines the Presidential Election Cycle—a historical market pattern that has attracted the attention of investors for decades. While history never guarantees future results, understanding these long-term tendencies can provide valuable perspective when combined with sound technical analysis and disciplined risk management.

For many decades, market historians have observed that stock prices have often followed a recurring four-year pattern associated with the U.S. presidential election cycle. While every administration faces unique economic, political, and geopolitical challenges, the market has historically displayed certain tendencies during each year of a presidential term.

Historically, the presidential cycle has generally unfolded as follows:

A newly elected administration typically begins implementing its campaign priorities, including new legislation, tax proposals, regulatory changes, tariffs, and federal spending initiatives. These policy adjustments can create uncertainty as investors evaluate their possible effects on corporate earnings, inflation, interest rates, and economic growth.

Market performance during the first year of a presidential term has historically been mixed, as investors attempt to determine which proposed policies are likely to become law and how those policies may affect the economy.

The second year of a presidential term has historically been the most volatile portion of the four-year cycle. Many notable corrections have occurred during midterm election years, particularly between the summer months and early autumn.

During this period, investors are often evaluating the economic consequences of the administration's policies while also confronting uncertainty surrounding the congressional midterm elections.

Although not every second presidential year experiences a major correction, this period has often produced meaningful market weakness and, in many cases, an important market low before the beginning of the next sustained advance.

Historically, the third year of the presidential cycle has produced the strongest average stock market performance.

Administrations often favor policies that encourage economic activity as the next presidential election approaches. Improving economic confidence, supportive fiscal policies, and increased government spending may contribute to a more favorable environment for financial markets.

Market advances that begin following a midterm-year decline have frequently continued well into the third year of the presidential term.

Presidential election years have also generally produced positive market returns, although volatility may increase as Election Day approaches.

Investors frequently assess the potential economic and regulatory differences between the candidates. Markets generally prefer political and economic certainty, and periods of uncertainty surrounding the election can occasionally create short-term volatility.

We are currently in the second year of the present presidential term, placing the market within the portion of the historical presidential cycle that has frequently experienced increased volatility.

Does this mean that the stock market is destined to decline?

Absolutely not.

Historical tendencies are not predictions. Every market cycle is unique and is influenced by a different combination of economic growth, corporate earnings, inflation, interest rates, Federal Reserve policy, fiscal policy, geopolitical events, and investor sentiment.

The presidential cycle simply reminds us that this portion of the four-year cycle has historically required investors to remain disciplined and attentive to changing market conditions.

At TSPFundTrading, we do not make investment decisions based solely on historical cycles, seasonal tendencies, political forecasts, or economic predictions.

Our allocation decisions are driven primarily by objective technical analysis, including market trends, Dow Theory, support and resistance levels, momentum indicators, market breadth, relative strength, volatility measurements, and overall risk assessment.

Historical patterns such as the Presidential Election Cycle provide additional context. When historical tendencies and technical indicators point in the same direction, they may strengthen our overall assessment. When they disagree, we follow the technical evidence.

As we move through the remainder of this second presidential year, we will continue monitoring the market carefully for evidence of either continued strength or a meaningful correction.

Markets rarely move in a straight line, and periods of volatility are a normal part of long-term investing. A temporary correction does not automatically signal the end of a bull market, just as a short-term rally does not necessarily signal the beginning of a sustained advance.

Regardless of what the presidential calendar may suggest, our primary objective remains unchanged: to preserve capital during unfavorable market conditions while participating in sustained market advances whenever the technical evidence supports doing so.

Thank you for your continued confidence in TSPFundTrading. We appreciate the opportunity to help guide your investment decisions and will continue providing timely analysis whenever market conditions warrant.