S&P 500: the trend should be bullish in the coming months - Analysis by Vincent Ganne
According to post-midterm seasonality statistics, the trend of the S&P 500 should be bullish in the coming months. Discover Vincent Ganne's technical analysis on this major stock market index.
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The United States stock market experienced a phase of short-term consolidation in October, against a backdrop of profit-taking in the technology sector and more particularly on semiconductors which retraced (under control) for 6 months, from June to early November in the wake of the US mid-term elections.
This phase of consolidation which preceded the US mid-term elections is interesting because it is part of a usual statistical seasonality for the US equity market. The study of quotation data for more than 50 years shows that the US stock market tends to be bullish in the 12 months following the elections, especially if the months preceding the election saw a phase of market procrastination.
The mid-term elections therefore saw a total victory for the Democrats in the US Senate and House of Representatives and the stock market suffered downward pressure linked to concerns about the prospects for AI CAPEX in the United States. The market fears that AI investments by hyperscalers will be held back by Democratic legislative initiatives.
The semiconductor compartment has been correcting since last June, but the situation could recover in the coming months, especially if concerns linked to the Democratic victory gradually fade away.
Statistical seasonality is indeed favorable to the US equity market in the months following the midterms.
The chart below, source Morgan Stanley & Bloomberg, shows that historically, the trend of the S&P 500 is largely bullish in the months following the US mid-term elections, especially if there was a phase of consolidation in the stock market in the months preceding the election.
The reaction of US stock indices was very erratic in the hours following the result of the mid-term elections but ultimately it was the downward pressure which took over.
Is the underlying upward trend of the S&P 500 index threatened?
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