It’s not the election! Many on TV are trying to blame the market weakness on the election. Don’t listen to them; it is just noise. The election is not a viable reason why the S&P 500 would break down in a meaningful way. Remember, you need to keep your political views separate from your investment mindset.
The reality is the momentum of the market started going south the second week of October, well before the FBI expanded the Clinton email investigation. This weakening of momentum has shifted us to a “hold” mentality. The market trend is weak, but there is little fear yet. The best thing we can do at this point is sitting on our hands and monitor our positions closely. The long-term trend is still for the bulls, but short-term conditions will require us to be patient.
Since 1997 we have had five US Presidential Elections. Across all of these elections, the stock market has averaged losses in September (-2.3%), October (-4.0%) and November (-2.8). While history is not an absolute guide, it does serve as a useful “weather vane” to help us navigate the markets.
On a bright note, I will share some encouraging signs coming from the Financial Sector. This chart, courtesy of Tom Bowley @ StockCharts.com, shows Financials are starting to breakout to the upside.
We are deep into earning season right now, and we know there are going to be some opportunities in this market, but we need to stay patient right now.
As always, “When the facts of the market change – so shall we.”