American stocks are entering a period that historically ranks among the strongest in the entire election cycle.
According to Deutsche Bank analysis, the S&P 500 index rose in 21 of the last 23 U.S. congressional election cycles, in the window from 1 month before the elections to 2 months after them.
The median index return over this 3-month period is 7%. In most of these years, the market moved more or less sideways from mid-July to early October, which also corresponds to this year's development.
History has seen exceptions for investors.
- In 1978, stocks fell around the elections due to rising inflation and interest rates
- In 2018, higher rates weighed on the market along with the trade war between the US and China
This year, however, we are likely facing the historically strongest earnings season:
Profits of companies in the S&P 500 index should, according to current expectations, rise by roughly 30% year-over-year.
Sure, we can always discuss that this is only historical data and yes, every market situation is unique. But it never hurts to recall possible scenarios and possibly count on them. After all, he who is prepared is not surprised :)