By the end of the third year of one's presidency stocks usually end higher

By Dian Vujovich

Too bad usually doesn’t come with a guarantee.

History shows us that by the end of the third year of one’s presidential term, stocks typically close that year up rather than down. That’s because by year three of a four-year term the economy is often humming right along.

According to a story in The New York Times in December, from 1946 through 2009 investors who owned stocks during the third year of a president’s term— but weren’t in the market for the other three years—made some handsome profits. But today is not yesterday and given the murky markets and current economic conditions at home and around the globe, 2011 could turn out to be one of those off years.

Not only has this year’s third quarter been an ugly one—the S&P 500 was down over 14 percent, NASDAQ off nearly 13 percent and the DJIA down over 12 percent—but Day 1 of the fourth quarter was ugly too.

Today the DJIA closed down over 248 points. Of the 30 stocks in that average, only Wal-Mart closed in positive territory. Its share price gained 6 cents to close at $51.96. And, two stocks in the Dow continued to close under 10 bucks a share— Alcoa at $8.90 and Bank of America Corp, at $5.53.

So where do the equity markets go from here during this third year of Obama’s presidency?

Believe it or not corporate America is in better shape today that it was a couple of years ago and that’s the good news. The bad news is that things in Europe aren’t looking so hot and as a result could cause a bigger drag on our markets than our negative U.S. consumer sentiment has.

Going forward that means the big strategy question all investors have to ask themselves, whether they are currently invested in equities or merely looking for a chance to enter the game, is a simple one: When will I need my money back?

The answer to that will likely determine your investment course better than any historical chart— or who is occupying the White House– ever could.

See the charts and read The New York Times story at: http://tinyurl.com/34gqska.