It looks bad out there.
It’s been a rough year for stock markets and futures are pointing to another drop today after a strong non-farm payrolls report. Thursday’s CPI data is a major risk as well.
One thing you could argue is that sentiment is already washed out and that the bears are everywhere. I’m sympathetic to that and the idea that all the bad news is already priced in. On the otherhand, Q3 reporting is coming and the strong dollar is a big problem for multi-nationals. Earnings estimates have to come down as well, and multiples are still rich (though much less so in small caps).
In any case, have a look at these two charts. The first is S&P 500 seasonality; which clearly shows a bottom in the first week of October and then strength through year end.
The second is the political calendar. If you go back 70 years and look at mid-term years in Presidential cycles, US equities are higher every single time from November throgh April, with a median of 16.2%. I’m skeptical of rujnning numerical correlations on politics with stocks in general but that’s a perfect record.
h/t @SJD10304 and @TalionBen
