Outlook for next 4 months

Historical Patterns in S&P 500 During U.S. Election Years

When looking at historical data, patterns often emerge that can help investors prepare for potential market movements. A key analysis from Bank of America Research sheds light on the seasonality of the S&P 500 during U.S. presidential election years. This data spans 96 years, from 1928 to the present, and reveals interesting trends in the stock market during these crucial periods.

Strong Months Before the Election

According to the data, June, July, and August are historically the best months for the S&P 500 in the lead-up to a U.S. presidential election. During these months, the market has shown positive returns, with many investors feeling optimistic about the upcoming election and the potential for new policies that could boost the economy. These summer months tend to be a period of growth and stability in the stock market, making them a favorable time for investors.

The Challenges of September and October

However, the situation changes as the calendar moves into September and October. Historically, these two months have been challenging for the S&P 500 in election years. The average returns during September and October have been negative, with -0.46% and -0.34%, respectively. The percentage of times the market has been up in September is only 50%, and slightly better in October at 58%. These months are often marked by uncertainty and volatility as the election approaches, and investors may become more cautious, leading to subdued market performance.

Historical Disasters in October

October, in particular, has a reputation for being a tough month for the markets, even beyond presidential election years. Many significant financial crises have occurred in October, such as the Lehman Brothers collapse in 2008. This month seems to carry a historical weight, where the market is more susceptible to unexpected downturns. Investors should be mindful of this trend and consider the potential risks when planning their strategies for October.

Positive Outlook for November and December

The good news is that the market tends to recover in November and December following the election. These months have historically shown strong positive returns, with November averaging 1.14% and December averaging 1.51%. December, in particular, stands out, with an 83% chance of a positive outcome in the market. This period is often characterized by a renewed sense of optimism as the election results are finalized and investors look forward to the potential for new economic policies.

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