How do we know? The political-stock market cycle tells us so.

Soon, two years will have passed since the last U.S. presidential election. The markets will have made it through that notoriously difficult period, and will be heading into the much more auspicious half of the four-year cycle, the pre-election and election years.

From 1833 to 2004, U.S. stocks averaged a 11 percent annual gain in pre-election years and a 6.8 percent advance in election years, according to the ''Stock Trader's Almanac,'' published by Yale Hirsch and Jeffrey Hirsch in Old Tappan, New Jersey.

Those returns towered over average gains of 1.6 percent a year in post-election years and 3.7 percent in mid-term years.

''Presidential elections every four years have a profound impact on the economy and the stock market,'' the Hirsches say in the almanac's 2006 edition. ''Wars, recessions and bear markets tend to start or occur in the first half of the term; prosperous times and bull markets in the latter half.''

The change of mood doesn't have to take hold precisely when the year ticks over on Jan. 1. Some of the great stock-market bottoms have occurred at various points in the second half of a midterm year - precisely the setting in which today's investors find themselves.

The Dow Jones Industrial Average reached a landmark closing low of 776.92 on Aug. 12, 1982, smack in the midst of the second year of Ronald Reagan's first term as president. Over the next 17 1/2 years, the average climbed 15-fold, to 11,722.28 on Jan. 14, 2000.

When that mighty bull market ran into a temporary snag in the credit crunch of 1990, the decline bottomed at 2,365.10 on Oct. 11, 1990, almost halfway through the presidency of George H. Bush.

And the most recent bear market, the nasty comedown of 2000-02, also reached its nadir in October of a presidential midterm year. From a close of 7,286.27 on Oct. 9, 2002, the average climbed to 11,642.65 on May 10, 2006.

Which brings us up to date. The closest thing we've experienced to a bear market in the first half of President Bush's second term has been a decline of 950 Dow points, from the aforementioned May high through mid-June this year.

Although there might not have been an out-and-out bear market, stocks have achieved little in a positive direction either over the past 18 months. Price appreciation - not counting dividends - for the Dow from the end of '04 through mid-2006 was 3.4 percent, according to my Bloomberg. The Nasdaq Composite Index shows a decline in the same span.

This year's flounderings evoke memories of 1994, a going-nowhere time for stocks that also happened to be a midterm year in the presidency of Bill Clinton.

Gloom and pessimism have lately gone to extremes. ''The forward price-earnings ratio of the Standard & Poor's 500 Index has fallen to its lowest point in a decade,'' says Shep Perkins, manager of the $12 billion Fidelity Mid-Cap Stock Fund, in the fund's annual report. ''This is somewhat antithetical given how low interest rates are in historical terms.''

''There's a healthy dose of fear and uncertainty in the market,'' Perkins says. ''If fears about the impact of higher interest rates, rising commodity prices and a meltdown in housing are overblown, then I would expect strong market performance..''

But if there's any life left in the political-stock market cycle, the stage looks nicely set for it to do its thing once more.

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Chet Currier is a Bloomberg News columnist. He can be reached at ccurrier@Bloomberg.net.