𝐖𝐄𝐄𝐊𝐋𝐘 𝐓𝐄𝐂𝐇𝐍𝐈𝐂𝐀𝐋 𝐌𝐀𝐑𝐊𝐄𝐓 𝐁𝐑𝐈𝐄𝐅𝐈𝐍𝐆 𝟵/𝟯𝟬/𝟮𝟰

𝐒𝐭𝐨𝐜𝐤𝐬 𝐡𝐢𝐭 𝐧𝐞𝐰 𝐫𝐞𝐜𝐨𝐫𝐝 𝐡𝐢𝐠𝐡𝐬 𝐚𝐠𝐚𝐢𝐧 𝐥𝐚𝐬𝐭 𝐰𝐞𝐞𝐤, 𝐫𝐢𝐝𝐢𝐧𝐠 𝐭𝐡𝐞 𝐰𝐚𝐯𝐞 𝐨𝐟 𝐨𝐩𝐭𝐢𝐦𝐢𝐬𝐦 𝐟𝐫𝐨𝐦 𝐭𝐡𝐞 𝐅𝐞𝐝’𝐬 𝐫𝐞𝐜𝐞𝐧𝐭 𝐫𝐚𝐭𝐞 𝐜𝐮𝐭, 𝐨𝐧𝐠𝐨𝐢𝐧𝐠 𝐀𝐈 𝐞𝐧𝐭𝐡𝐮𝐬𝐢𝐚𝐬𝐦, 𝐚𝐧𝐝 𝐬𝐢𝐠𝐧𝐬 𝐨𝐟 𝐛𝐫𝐨𝐚𝐝𝐞𝐧𝐢𝐧𝐠 𝐥𝐞𝐚𝐝𝐞𝐫𝐬𝐡𝐢𝐩 𝐮𝐧𝐝𝐞𝐫𝐧𝐞𝐚𝐭𝐡 𝐭𝐡𝐞 𝐬𝐮𝐫𝐟𝐚𝐜𝐞 𝐨𝐟 𝐭𝐡𝐞 𝐛𝐮𝐥𝐥 𝐦𝐚𝐫𝐤𝐞𝐭.

U.S. stocks rose for the third week in a row, extending their recovery from a sharp weekly decline in the first week of September. The S&P 500 and the Dow added 0.6% to the record-high levels they reached the previous week; the NASDAQ rose 1.0% and ended up 2.8% below a record it set more than two months ago.

𝐓𝐞𝐜𝐡𝐧𝐢𝐜𝐚𝐥𝐥𝐲, 𝐭𝐡𝐞 𝐑𝐮𝐬𝐬𝐞𝐥𝐥 𝟐𝟎𝟎𝟎® (𝐑𝐔𝐓) 𝐬𝐦𝐚𝐥𝐥-𝐜𝐚𝐩 𝐢𝐧𝐝𝐞𝐱 𝐚𝐩𝐩𝐞𝐚𝐫𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐛𝐫𝐞𝐚𝐤𝐢𝐧𝐠 𝐨𝐮𝐭 𝐨𝐟 𝐚 𝐛𝐮𝐥𝐥 𝐟𝐥𝐚𝐠 𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧. “If the RUT is able to clear its prior 52-week high from back in July, this could shift the ‘rotation trade’ into a higher gear and would likely be viewed as a bullish confirmation.”

𝐌𝐚𝐫𝐤𝐞𝐭 𝐛𝐫𝐞𝐚𝐝𝐭𝐡 𝐬𝐭𝐚𝐲𝐞𝐝 𝐡𝐞𝐚𝐥𝐭𝐡𝐲 𝐚𝐡𝐞𝐚𝐝 𝐨𝐟 𝐭𝐡𝐞 𝐰𝐞𝐞𝐤𝐞𝐧𝐝 with 79% of S&P 500 stocks trading above their respective 200-day averages and 82% above their 50-day moving averages. Wide breadth can indicate a healthy market where investors aren’t piling most of their money into just a few heavily capitalized mega caps. However, sentiment has grown frothy, which can sometimes indicate rougher sailing ahead.

𝐂𝐡𝐢𝐧𝐞𝐬𝐞 𝐬𝐭𝐨𝐜𝐤𝐬 𝐬𝐮𝐫𝐠𝐞𝐝 𝐬𝐡𝐚𝐫𝐩𝐥𝐲 𝐥𝐚𝐬𝐭 𝐰𝐞𝐞𝐤 as the nation’s central bank approved measures to accelerate recently sluggish growth for the world’s second-largest economy. The People’s Bank of China on Tuesday announced plans to lower borrowing costs, inject more funds into the economy, and ease households’ mortgage repayment burdens.

𝐓𝐡𝐞 𝐩𝐫𝐢𝐜𝐞 𝐨𝐟 𝐔.𝐒. 𝐜𝐫𝐮𝐝𝐞 𝐨𝐢𝐥 𝐝𝐫𝐨𝐩𝐩𝐞𝐝 𝐧𝐞𝐚𝐫𝐥𝐲 𝟒% 𝐟𝐨𝐫 𝐭𝐡𝐞 𝐰𝐞𝐞𝐤 𝐭𝐨 𝐥𝐞𝐬𝐬 𝐭𝐡𝐚𝐧 $𝟔𝟗 𝐩𝐞𝐫 𝐛𝐚𝐫𝐫𝐞𝐥 on Friday. That price is down from a recent high of nearly $84 per barrel in early July and is little changed year-to-date.

𝐌𝐚𝐫𝐤𝐞𝐭𝐬 𝐡𝐚𝐯𝐞 𝐧𝐨𝐭 𝐲𝐞𝐭 𝐬𝐞𝐞𝐧 𝐚𝐧𝐲 𝐦𝐞𝐚𝐧𝐢𝐧𝐠𝐟𝐮𝐥 𝐫𝐞𝐚𝐜𝐭𝐢𝐨𝐧𝐬 𝐟𝐫𝐨𝐦 𝐞𝐥𝐞𝐜𝐭𝐢𝐨𝐧 𝐮𝐧𝐜𝐞𝐫𝐭𝐚𝐢𝐧𝐭𝐢𝐞𝐬. However, they may yet emerge as November approaches, and a focus on policy proposals (and differences) intensifies. Volatility typically rises ahead of election day but often subsides quickly, as investors turn their attention back to the prevailing economic and market trends.

𝐌𝐚𝐫𝐤𝐞𝐭𝐬 𝐡𝐚𝐯𝐞 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐞𝐝 𝐰𝐞𝐥𝐥 𝐥𝐞𝐚𝐝𝐢𝐧𝐠 𝐮𝐩 𝐭𝐨 𝐭𝐡𝐢𝐬 𝐲𝐞𝐚𝐫’𝐬 𝐩𝐫𝐞𝐬𝐢𝐝𝐞𝐧𝐭𝐢𝐚𝐥 𝐞𝐥𝐞𝐜𝐭𝐢𝐨𝐧. Stocks were higher again last week, notching the sixth weekly gain in the last seven, with an impressive gain of 11% since early August.

𝐇𝐢𝐬𝐭𝐨𝐫𝐢𝐜𝐚𝐥𝐥𝐲, 𝐦𝐚𝐫𝐤𝐞𝐭 𝐯𝐨𝐥𝐚𝐭𝐢𝐥𝐢𝐭𝐲 𝐡𝐚𝐬 𝐫𝐢𝐬𝐞𝐧 𝐥𝐞𝐚𝐝𝐢𝐧𝐠 𝐮𝐩 𝐭𝐨 𝐞𝐥𝐞𝐜𝐭𝐢𝐨𝐧𝐬 and subsided after. Since World War II, volatility has decreased by an average of 16% in the month following presidential elections. Most recently, the VIX index (a measure of stock market volatility) declined 36% in the 10 days following the 2020 Trump-Biden election.

Over the past 80 years, in the month leading up to presidential elections, the stock market was positive for that month in slightly more than half the years.

However, from the election through year-end, the market was positive during that period in all but three years. It’s worth pointing out that the largest post-election (through year-end) gains occurred in (in descending order): ’20, ’52, ’60, ’04, ’80, ’72, ’16, ’96, ’76, and ’92. This reflects the fact that markets have taken direction more consistently from broader fundamental conditions than from political parties.

𝐓𝐡𝐞 𝐬𝐭𝐨𝐜𝐤 𝐦𝐚𝐫𝐤𝐞𝐭 𝐝𝐫𝐨𝐩𝐩𝐞𝐝 𝐚𝐧 𝐚𝐯𝐞𝐫𝐚𝐠𝐞 𝐨𝐟 -𝟏% 𝐢𝐧 𝐭𝐡𝐞 𝐰𝐞𝐞𝐤 𝐟𝐨𝐥𝐥𝐨𝐰𝐢𝐧𝐠 𝐭𝐡𝐞 𝐞𝐥𝐞𝐜𝐭𝐢𝐨𝐧. The worst 1-week performance followed the 1948 (-6%) and 2008 (-15%) elections; the best followed election day in 2020 (5%), 2004 (3%), and 1996 (2%). More than 60% of the time, the stock market was down in the week following the election.

𝐓𝐡𝐞 𝐬𝐭𝐨𝐜𝐤 𝐦𝐚𝐫𝐤𝐞𝐭 𝐢𝐧𝐜𝐫𝐞𝐚𝐬𝐞𝐝 𝐛𝐲 𝐚𝐧 𝐚𝐯𝐞𝐫𝐚𝐠𝐞 𝐨𝐟 𝐥𝐞𝐬𝐬 𝐭𝐡𝐚𝐧 𝟏% 𝐢𝐧 𝐭𝐡𝐞 𝐦𝐨𝐧𝐭𝐡 𝐟𝐨𝐥𝐥𝐨𝐰𝐢𝐧𝐠 𝐭𝐡𝐞 𝐞𝐥𝐞𝐜𝐭𝐢𝐨𝐧.

The worst 1-month performance followed the 1984 (-4%) and 2008 (-16%) elections; the best followed election day in 2020 (9%), 2004 (6%), and 2016 (5%). The tables are flipped versus the 1-week figures, with the market positive more than 60% of the time in the following month.

In any case, closely monitor the technicals and “𝐓𝐫𝐚𝐝𝐞 𝐖𝐡𝐚𝐭 𝐘𝐨𝐮 𝐒𝐞𝐞, 𝐍𝐨𝐭 𝐖𝐡𝐚𝐭 𝐘𝐨𝐮 𝐓𝐡𝐢𝐧𝐤”.

𝐇𝐚𝐫𝐫𝐲 𝐁𝐨𝐱𝐞𝐫, 𝐀𝐮𝐭𝐡𝐨𝐫

𝐕𝐞𝐭𝐞𝐫𝐚𝐧 𝐓𝐫𝐚𝐝𝐞𝐫, 𝐄𝐱𝐩𝐞𝐫𝐭 𝐓𝐞𝐜𝐡𝐧𝐢𝐜𝐚𝐥 𝐌𝐚𝐫𝐤𝐞𝐭 𝐀𝐧𝐚𝐥𝐲𝐬𝐭 & 𝐅𝐨𝐮𝐧𝐝𝐞𝐫 𝐨𝐟 𝐓𝐡𝐞𝐓𝐞𝐜𝐡𝐓𝐫𝐚𝐝𝐞𝐫.𝐜𝐨𝐦