- Like bees and turkeys, some folks in the financial market industry have no memory of the day (week, month, etc.) before, not to mention normal seasonal patterns.
- Seasonally, both the S&P 500 and Dow Jones Industrial Average tend to trend down during September before turning up through the end of the year.
- For those interested in the 2024 US Presidential Election, the next two months will be key, based on one research study.
Even though I’m not listening, I can hear it now, the Chicken Littles of financial media all squawking “The sky is falling!” in relation to Tuesday morning’s selloff in US stock indexes. A look at this morning’s market shows the Nasdaq is down 338 points (1.9%), the S&P 500 is off 77 points (1.4%), and the Dow Jones Industrial Average has dropped 482 points (1.2%). I find it interesting this sector of the financial industry, the Chicken Littles, also share with turkeys and bees the inability to remember the day (week, month, etc.) before, let alone a market’s normal seasonal pattern. I call this the Birds and the Bees Blindness[i]. It’s also interesting to note Asian stock markets closed lower across the board overnight through early Tuesday morning while European markets were lower late in Tuesday’s session[ii]. With that flock of birds covered, let’s take a look at the seasonal patterns for the S&P 500 and Dow Jones Industrial Average.
As stated in the open, the S&P 500 (($INX) tends to come under pressure during September. A look at its seasonal indexes shows from the last weekly close of August through the last weekly close of September:
- 5-year index (red line) with an average loss of 5%
- 10-year index (blue line) with an average loss of 3%
- 20-year index (purple line) with an average loss of 2%
- 30-year index (gray line) with an average loss of 1%
Based on last week’s close of 5,648.40, the seasonal projections for the last weekly close of September are:
- 5-year index (red line) ~ 5,366
- 10-year index (blue line) ~ 5,479
- 20-year index (purple line) ~ 5,535
- 30-year index (gray line) ~ 5,592
We see something similar on the seasonal studies for the Dow Jones Industrial Average ($DOWI):
- 5-year index (red line) with an average loss of 4%
- 10-year index (blue line) with an average loss of 2%
- 15-year index (purple line) with an average loss of 1%
- 25-year index (gray line) with an average loss of 2%
Based on last week’s close of 5,648.40, the seasonal projections for the last weekly close of September are:
- 5-year index (red line) ~ 41,497
- 10-year index (blue line) ~ 41,546
- 15-year index (purple line) ~ 41,970
- 25-year index (gray line) ~ 41,546
For those of you tracking the S&P 500 as it pertains to the 2024 US Presidential Election
- Based on the Presidential Predictor, “a handy little metric crafted by CFRA Chief Investment Strategist Sam Stovall”[iii]:
- If the Index shows a gain from the last settlement of July through the last settlement of October the party in office stays in office
- If the index shows a loss from the last settlement of July through the last settlement of October the opposition party takes office
The S&P 500 closed July at 5,522.30. Seasonally, from the last weekly close of September through the last weekly close of October:
- 5-year index (red line) shows an average gain of 4%
- 10-year index (blue line) shows an average gain of 1%
- 20-year index (purple line) shows an average gain of 1%
- 30-year index (gray line) shows an average gain of 1%
Putting end of October targets:
- 5-year index (red line) ~ 5,580
- 10-year index (blue line) ~ 5,534
- 20-year index (purple line) ~ 5,591
- 30-year index (gray line) ~5,648
Keep in mind seasonal analysis looks at the average move made by a market over the course of a 12-month period, usually measured by calendar year (financials, energies) marketing year (grains and oilseeds), or other (livestock). We can use these averages as a guide to possible moves the market could make, but not the leader of market moves as covered by what I call the Sacagawea Similarity[iv]. Since these studies show tendencies, a market can move more or less than the average. Also, things get interesting when we see contra-seasonal moves as it indicates a change from normal supply and demand. But that’s a subject for another day.
[i] In this case, Blindness is defined as “Unable or unwilling to perceive or understand”.
[ii] Bringing to mind the third connection of US stock indexes to birds, that being The Chicken-or-the-Egg Debate: Do US stock indexes lead or follow the markets in Asia and Europe?
[iii] From this 2020 Forbes piece: (LINK)
[iv] With no disrespect to Sacagawea of Lewis and Clark fame.
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