Sam Stovall, noted stock market historian and S&P Capital IQ’s Chief Investment Strategist, is out with his latest Stovall’s Sector Watch note.If history is a guide, then the worst of the year may be behind for stocks. He draws on over a hundred years stock market performance and how they performed during election years, something he has written about before.
First, he notes that performance in 5 out of 6 months have been spot on:
The S&P 500’s performance mid-way through this election year hasn’t been too far off base when compared with the average election year going back to 1900. The “500’s” monthly results saw gains in January, February, and March, followed by declines in April and May, and concluded with a gain in June. Therefore, only February got the steps wrong.
If It continues to track like the average election year, then here’s what happens next:
Should the market continue to mimic the average election year since 1900, and there’s no guarantee it will, we will find that:
-The worst is already behind us, as 78% of all yearly lows occurred in the first half.
-85% of all highs happened in the second half, and 70% in the fourth quarter.
-The S&P 500 posted its strongest gain in Q3, rising 5.0% and gaining in price 61% of the time. (This data contradicts a look-back to only 1945.)
-July and August were the strongest months, gaining an average of nearly 2% and 3%, respectively. The final four months’ results have also been positive.
Earlier this year, Stovall wrote that stocks can predict Presidential elections with 88 per cent accuracy. Read about it here.