economy
Chart Analyst Says It's Time to Hedge. The Typical Midterm Election Year Turbulence Starts This Week
The stock market rally has been nothing short of impressive, but investors shouldn't get complacent.
TL;DR
- The S&P 500 is up over 13% for the year, with the equal-weight version gaining 16%, and most sectors are in positive territory.
- BTIG's Jonathan Krinsky warns that history indicates the upcoming period (August 18 - October 11) is typically difficult during midterm election years.
- Since 1990, the S&P 500 has dropped at least 7% between August and October in every midterm year except 2006.
- External events like geopolitical conflicts or health crises have often triggered market downturns.
- Current conditions include high stock valuations, low volatility, and concerning bond market signals (10-year yield above 4.7%, 30-year topping 5.2%).
- Krinsky recommends paring down risk, hedging equity exposure, and considering the healthcare sector for defensive positioning, as it has been the best-performing sector in the last three months.