Bank of America reveals stronger summer market rallies during US presidential election years, challenging traditional investment strategies
Bank of America has reported that summer rallies have historically been stronger during US presidential election years, challenging the old adage “sell in May and go away,” according to BNN Bloomberg.
Their analysis revealed that since 1928, the US benchmark S&P 500 has risen 75 percent of the time during election years, with an average return of 7.3 percent. This compares to a 65 percent frequency of gains and an average return of 3.2 percent during the same period across all years.
Despite the historical pattern of weak performance from May to October, these months often yield positive returns, according to Bank of America.
Robert (Hap) Sneddon, a technical analyst and president at CastleMoore, echoes a similar sentiment, noting that smart investors don't completely withdraw during these months. He highlighted that sectors like biotechnology, bonds, and energy often present significant opportunities during the summer.
Sneddon further pointed out that the S&P 500 might not fully represent the market dynamics, especially for Canadian investors who must account for currency fluctuations. He observed that the Canadian dollar usually strengthens against the US dollar from March to September.
However, current discussions of interest rate changes by the Bank of Canada and the US Federal Reserve are expected to pressure the Canadian dollar.
Technical analysis remains a critical tool for investors, aiming to forecast future market movements by analyzing past patterns. This method relies on statistical data from market prices and volumes over various timeframes.
Technical analysts use tools like moving averages to identify market trends and set support and resistance levels.
Unlike fundamental analysts who evaluate a security’s intrinsic value through metrics like corporate profits and supply-demand dynamics, technical analysts focus on price movements, believing that all fundamental data is already factored into the market prices.
Although technical analysis is generally reliable, it is not foolproof and does not always predict market movements accurately. It is seldom the sole strategy for investment funds, which often combine multiple analytical methods.
Despite its limitations, technical analysis provides valuable insights and is widely accessible to investors through online tools and institutional investment strategies.
