(MONEY Magazine) – On average, the 30 Dow industrials have gained a modest 4.1% in the first year of presidential terms since World War II and 3.3% for the past eight terms shown at right. Such subdued advances, however, mask large variations. In John F. Kennedy's first year in office, the Dow rocketed up 18.7%, while in Jimmy Carter's first year, it suffered a 17.3% loss. Analysts say that stock market behavior during a President's initial year reflects economic cycles more than political concerns. Since 1900, the Dow has had about the same chance of rising under both Republicans and Democrats. The swing factor was often whether stock prices had risen 15% or more in the year before the election year. Six of the eight times that happened, a bear market took hold within a year of the Inauguration. Federal Reserve policies also have an effect. In the four years when the Fed aggressively pushed up short-term interest rates, the Dow fell (1969, 1973, 1977 and 1981); in the four years when rates went up only a little or declined, share prices rose (1961, 1965, 1985 and 1989). Both those indicators are bad news for '93. Since stocks rose 20% in 1991 and most economists think rates are likely to rise next year, the stock market in Clinton's first year may face hard going. -- E.S.

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