S&P 500 Record Not Seen Since Eisenhower

On Trump’s Twitter and across some news platforms, stories reporting the growing economy under the current President are prevalent.  The headlines and news stories sometimes focus on the increase in jobs and the lower unemployment rate while others state that these numbers point to consumer confidence or a boost in manufacturer sentiment. Most frequently these stories point to the stock market or S&P 500 Index.  While many critics, media outlets, and politicians alike claim Trump is doing no better than Obama or other Presidents before him, there is one thing happening in the current market that certainly sticks out.  For the first time since Dwight Eisenhower back in 1958, the S&P 500 will end positive for the months of April, May, June, and July during a year that features a midterm election.

The positive numbers during this period are a very rare sign of a bullish market, according to Jeffrey Saut, the Chief Investment Strategist at Raymond James. During both midterm elections that occurred in Eisenhower’s two terms as President, 1954 and 1958, the market saw an increase over these four months.  In 1954, after the positive four months, the index saw a surge of 16.5% during the rest of the year.  Similarly, in 1958, the index saw the same trend and surged more than 17%.

The trends similar to those witnessed during the Eisenhower years are being forecasted for the rest of 2018 by Saut.  In his forecasts, he expects to see the S&P 500 top the 3000 mark, meaning a 7% growth during the remainder of the year.  Also, like the Eisenhower era of index success, Saut expects that during August, the fund will have a slight decrease in the first week.  Saut cites the current fault in the FANG stocks and the broken down small-cap stocks as the short term reason for this predicted drop in August.  While his long-term outlook may be more divisive, his short-term view is shared by many experts as a result of disappointing returns from Netflix and Facebook in the final days of July.

Despite the Facebook plummet and chaos, Saut remains confident.  “While the money is coming out of the Facebooks and Twitters of the world, it is finding other ways to invest. A few years ago in the tech carnage, if Facebook would’ve coughed up a hairball like it did, the whole market would’ve imploded. And that just didn’t happen last week.”

Other experts agree on the valuation of the S&P 500 and market as a whole in August.  Many forecast August to be a very volatile month because volatility traditionally picks up during this time of year. Historically, the average daily move in the S&P 500 during August is 0.6%, but during midterm election years, fluctuations increase, hitting an average daily change of 0.8%.  In addition to these historical and somewhat expected daily changes Samuel Stovall, Chief Investment Strategist at CFRA, thinks that the continued trade tensions between the US, China, and Europe will increase the market’s volatility.

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