As we noted back in January, midterm election years tend to be relatively volatile periods—with stocks historically seeing the largest intra-year pullbacks.
But why is that? Of course, there are many likely reasons, but one potential reason is that in the past the political party that has won the presidency has lost seats in the House and Senate during the midterm election, generating some uncertainty during these years.
Looking at the full four-year presidential cycle also shows that the second and third quarters of the president’s second year in office (so right now) can indeed have bulls frustrated. “Going all the way back to the Dow’s inception in 1896 displays that this quarter and next quarter are quite weak historically. But the good news is we’ve seen big rallies after this weakness. However, this is something to be aware of as we move forward in this midterm year,” said Ryan Detrick, Senior Market Strategist.
Although we expected more volatility this year, we are seeing some signs of better times ahead for equites. Be sure to be on the lookout for our latest Weekly Market Commentary due out Monday, where we look at some positive technical developments on equities.
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