“The business of America is business.” President Calvin Coolidge
Did you know the S&P 500 gained one penny from the end of May until the end of October?
That’s right, for five months it has pretty much gone nowhere, and thanks to Phil Rosen, Chief Market Strategist at Silvia, for that nugget. Taking this a step further, over the past three months the S&P 500 has traded in a range of only 3.5%, which is in the bottom 1% of all ranges according to Warren Pies, founder at 3Fourteen Research.
Here’s a chart that shows the S&P 500 continues to trade in a very tight range above the summer highs and in one of the least volatile and tight ranges ever. Sure doesn’t feel that way though, does it?
We are aware it might feel much worse though, as many highfliers have been hit very hard, while the under-owned areas like healthcare, staples, and utilities have soared lately. In October, the median stock gained more than 7% and the average stock close to 5%, but when tech fell more than 8% and communication services crashed 10% it felt way worse. Those two groups make up more than 45% of the S&P 500 by the way.
And now, here are three things to watch as we move into the midterm elections and November.
A November to Remember?
Let’s be clear, it isn’t like seasonality has played out perfectly this year. Still, November is the best month on average for the S&P 500 since 1950, the best in the past 10 years, the second best in the past 20 years, and the second best in a midterm year.
We get it, October is the best month historically in a midterm year, and after the huge 1.8% drop on Friday, it finished the month in the red; and July had been very strong lately, and it also finished in the red.
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Well, some good news is we’ve never seen both October and November lower in a midterm year, as the five times October was in the red saw November snap back each time, and December has usually been strong as well. Of course, the one time December was lower was in President Trump’s first term when we saw October lower, and December crashed a record 9.2%, so something for everyone here.
These Are The Best Six Months
Some more good news? The historically worst six months of the year are May through October, and we are now headed for the best six months. These past six months were rough for many investors, and now that’s past us, could better times be coming? We think so, as these next six months are higher more than 76% of the time and up close to 7% on average.
Right Now In A Midterm Year Is Very Strong Historically
Building on these next six months, the S&P 500 has never been lower starting in November of a midterm year going back to 1950. That is 19 out of the past 19 times the S&P 500 gained with an average return of nearly 15%. Yes, there are many other factors to consider versus simply investing on seasonals like this, but we still think it is important to consider, and the midterm election tailwinds are real and likely to happen again in the next six months.
Thanks as always for reading, and given today is the midterm elections, be sure to go out and vote! As always, we appreciate you reading what our team has to say, and for more thoughts on the AI wave, we were joined by Alvin Graylin, Professor of AI Policy at the University of Washington, on our latest Facts vs Feelings Social Hour.
For more content by Ryan Detrick, Chief Market Strategist, click here.
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