Election year pattern points to a September-October pullback https://64.media.tumblr.com/f75687eb...spdppr_500.jpg
At the close of trading yesterday, DJIA was up 6.3% year-to-date. S&P 500 was up a similar 6.7% and NASDAQ was up 4.1%. At these levels of performance DJIA and S&P 500 are slightly above average compared to past election years while NASDAQ is roughly in line with historical averages for this time of the year. Barring some disastrous exogenous event, the worst-case Eighth Year of Presidential terms scenario appears to be off the table. https://64.media.tumblr.com/042dce3f...spdppr_500.jpg https://64.media.tumblr.com/53c33b08...spdppr_500.jpg https://64.media.tumblr.com/6e4f8bbb...spdppr_500.jpg
Now that the 8th Year scenario is highly unlikely let’s turn attention towards the more likely typical election year pattern for the remainder of the year. Although August is typically a weak month, this is not the case in election years. Since 1952, DJIA and S&P 500 have averaged gains of 0.8% and 1.0% respectively in election-year Augusts. NASDAQ is even stronger, up 2.9% on average since 1972. However, once August ends and September arrives, back-to-school and back-to-work time, weakness does creep back into the picture.
Looking at the above three charts, an interim top is seen at the beginning of September for DJIA and S&P 500. NASDAQ strength tends to last slightly longer, until about mid-month September. Weakness then tends to persist until early- or mid-October before the market rebounds to close out the year on a positive note.
