"The third year of the Presidential cycle has historically been the most profitable year of the cycle in terms of stock market performance," says market historian and money manager Jim Stack.

The editor of InvesTech Market Analyst explains, "This third year of the four-year cycle is often characterized by an accommodative Fed policy, and usually accompanied by a stable and growing economy.

"Characteristically, most of the third year gains come in the first half of the year where the first and second quarters are among the strongest in the entire cycle.

"While traditionally many investors worry about the potential effects of runaway inflation on stock prices, lately others worry more about the potential effects of deflation, a falling price level," observes Mark Salzinger.

"There's certainly plenty of common sense behind worries that either deflation or significant inflation would be bad for equity prices, but does the history of stock prices agree?" asks the editor of No-Load Fund Investor.

"We believe that for the next year or two, likely low demand for loans and considerable slack in employment and capacity utilization greatly limit the possibility of rapidly increasing inflation. The odds of deflation are higher, but still not high.

"The period around mid-term elections is nearly always conducive to stock market gains, regardless of the political outcome," suggests market historian and money manager Jim Stack.

The editor of InvesTech Market Analyst explains, "We are now coming up on the strongest 3-quarter period of the 4-year Presidential Election Cycle.

"In fact, the fourth quarter of the mid-term election year has the highest average return of all quarters in the cycle (6.3%). Looking back over the last 20 election cycles since 1929, the average cumulative gain over the upcoming 3-quarter period starting in October is a healthy 18.1%.