🔥Midterm year in the presidential term — the stock market adjustment rate is 100% in the last 13 times

Since 1974, the US has had 13 midterm election cycles — all 13 times the S&P 500 saw a sharp pullback afterward (average -19%):
- 1974 Ford: -35%
- 1978 Carter: -15%
- 1982 Reagan: -17%
- 1986 Reagan: -10%
- 1990 George H.W. Bush: -20%
- 1994 Clinton: -8%
- 1998 Clinton: -22%
- 2002 George W. Bush: -34%
- 2006 George W. Bush: -8%
- 2010 Obama: -17%
- 2014 Obama: -10%
- 2018 Trump: -20%
- 2022 Biden: -27%
- 2026 Trump: ???
More evidence against the rise in US stocks’ price momentum:
- The new Fed chairman, Warsh, has only been in the seat for 8 weeks. Over the past 90 years, almost every new chairman has been greeted by the market with a roughly -12% drop in the early part of the term. The first test will be the FOMC on 29/7
- The last time two overlapping cycles occurred was 2018: Powell took office + Volmageddon erupted on the very first day -> -20% by Christmas Eve
- VIX just jumped to 18.77 (+12%), while the peak VIX in midterm years usually falls in September–October
- Meanwhile, retail investors’ cash allocation is in an extremely low zone (only seen in 1998, 2000, 2018, 2021), put/call skew is at a record low, and IPOs are drawing record liquidity.
- Add SOX into the bear market and oil at $82 due to the Strait of Hormuz
-> However, history also shows that all 13 pullback waves above were buying opportunities. Since 1934, the average rally from the midterm low is +47%, and in 4 out of 5 times the market went on to break the old high.