Investors hate uncertainty, yet there are plenty of unknowns facing the stock market.
Questions are swirling over the AI trade. Will credit markets seize up as leading AI companies warn about access to capital? That comes as Anthropic prepares for its public listing, which could break records if investor appetite for AI stocks holds up.
Interest rates are another unknown. After raising rates in September, the Fed held rates steady today but left the door open for more hikes in the months ahead.
On top of all that, midterm elections are next week. The political composition in Washington will impact everything from AI to crypto to energy markets.
Midterm election years have a nasty reputation for volatility, and the AI developments and Fed uncertainty are making it worse.
But based on one little-known pattern, it’s what comes after midterms that should have investors excited…
Forbes calls it “one of the most reliable patterns in U.S. market history.” Billionaire Ken Fisher says it’s “one of America’s most persistent, but least-known market anomalies.” If you play it right, you can use it to make gains as big as $1,245… $950… and $1,325 nearly every single week. The last time this anomaly struck was in November 2022, right before Biden’s third year. It’s happened every four years WITHOUT FAIL since 1950. This time, it’s set to begin on November 4. If you want to find out how you can profit, watch this special presentation.
While everyone was distracted with the recent SpaceX IPO… Elon Musk quietly filed a patent with the U.S. Patent and Trademark Office to protect what Jeff Brown believes will be his next breakthrough… Something he called “the greatest tech invention in history.” Click here to see the details because Elon is predicting this new AI breakthrough will unleash a $1 quadrillion new wealth wave.
Stock market seasonality is a key element to spotting trading trends – bullish or bearish.
Seasonality refers to the stock market’s tendency to rise or fall over certain periods of the calendar year. For example, you may have heard the phrase, “Sell in May and go away.”
That refers to the S&P 500’s historical tendency to have a difficult six-month stretch from May through October. On the flip side, the six months from November to April are often bullish when you look back historically.
Certain months are known to be more bullish than others, like July and December. Months like October get a bad reputation for declines and outright crashes – like what happened in 1929, 1987, and 2008.
There are seasonal trends within the four-year Presidential cycle as well. Years one and four of a U.S. president’s term produce average gains of just over 8% using data back to 1950.
But the years in the middle tend to be more volatile. So what comes next could catch investors by surprise and send volatility into overdrive…
Midterm election years get a bad rap for volatility, and history backs it up.
Midterm years produce the weakest returns overall while experiencing an intra-year drawdown of 17% on average – nearly a bear market.
While the S&P is positive on the year now, it’s well off the pace of the past several years. And at one point this year, the average stock within the S&P saw an average drawdown of 20% from its 52-week high.
That shows midterm seasonality is playing out like it always has. This midterm cycle has extra fuel. Three catalysts are hitting at once: questions over AI spending, Fed rate hikes, and a war in the Middle East that’s roiling energy markets.
Any one of those is enough to drive volatility. With all three converging during a midterm election year, we have a recipe for price swings.
But there’s a little-known seasonal pattern that comes after midterms as well. And I believe it’s going to create an incredible opportunity for traders over the year ahead. Because this pattern suggests that we could be about to see all that volatility turn into a significant rally in the market.
The pattern has held true going back to 1950… and several factors could send stocks into overdrive.
That’s what I covered in a recent briefing, where I shared how this pattern could help traders turn one ticker into $100,000 in the year ahead.
If you want all the details on the strategy that makes that possible, watch here now.
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict
Reading Trading With Larry Benedict will allow you to take a look into the mind of one of the market’s greatest traders. You’ll be able to recognize and take advantage of trends in the market in no time.
