The four-year cycle is determined by the US presidential election. 2004 was an election year. We have and the cycle years are:
2004: Election Year
2005: Post-Election Year
2006: Midterm Year
2007: Pre-Election Year
The course of important US markets is largely dependent on whether the current year is an election year or one of the three cycle years following an election. Stocks tend to see an above average increase during the year preceding an election year. The reason for this development is assumed to economic policy before an election. Increasing stock prices and a booming economy sheds positive light on the incumbent political party.
But not only stocks are influenced by the US election cycle. Interest rates and currencies can also be affected. Through the dominance of the US capital markets, international markets are also influenced by the election cycle including the German stock market.
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