The pattern, evident in data from S&P Global Market Intelligence, may reflect a tendency by the party that holds the White House to enact—or try to enact—less-market-friendly policies well in advance of the elections midway through each presidential term.
Some researchers doubt that this finding is statistically meaningful.
Although Congress enacted trillions of dollars in pandemic relief programs, those are expiring.
Because consumers amassed savings during the pandemic and have shown signs of being eager to spend, analysts see scant risk of a recession.
To keep the economy from going into a tailspin, the Fed last year cut its benchmark interest rate to near zero and began large purchases of government bonds.
Markets also expect the Fed to raise its benchmark bank lending rate twice next year, perhaps by a total of 0.5 percentage point, further tightening policy.
These steps would remove a large amount of liquidity from the financial system, says Steve Sosnick, chief strategist at Interactive Brokers.
Corporate profits—a key ingredient in investor enthusiasm for stocks—are estimated to surge about 43% for 2021 versus last year.
“Virtually every company will experience some form of cost pressure,” says Eddie Perkin, chief equity investment officer at Eaton Vance Management, an asset-management company.
But next year, with inflation possibly lingering and the Fed draining liquidity from the economy, investors may decide that stocks are overly expensive, says Timothy Murray, a capital-markets strategist at T.
The market also may prove less resilient in the face of new shocks, such as the possible emergence of a more virulent version of Covid-19.
But when analysts track how the market has fared on a rolling basis in past decades, the data shows that strong stretches usually are followed by more-lackluster periods, says Mr. Stovall of CFRA.