A president's second year is usually not very favorable, and the market has risen, on average just 0.4%. That's when a president often looks to enact tougher policies that can often restrain growth, knowing that several years remain before voters will respond to the new set of policies. Year No. 2 is often characterized by higher taxes, closed loopholes, and vetoed pork-barrel spending. Think of Ronald Reagan's second term, when he agreed to a series of tax hikes in 1986. He would never have done so if his party had been faced with an imminent presidential election. That's why markets have historically been flat in the second year of a presidential term.Of course, Washington has been so gridlocked that only a few bits of legislation were passed in 2010. Perhaps because of that gridlock, the S&P 500 managed to move up to 1140, good for a 9% gain.
2012 Stock Predictions and Outlook
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