Forecasting involves estimating future trends. Stock market forecasters try to predict the direction of the stock market by relying on technical data of trading activity and fundamental statistics on the direction of the economy. Economic forecasters attempt to predict the strength of the economy, utilizing complex econometric models to make specific predictions of future levels of inflation, interest rates, and employment.
The Presidential Election Cycle Theory posits that major stock market moves are influenced by the four-year presidential election cycle, with stocks expected to rise in anticipation of economic recovery efforts by the incumbent president before election day.
