Btig warns stock investors on seasonal weakness ahead in election year

Investing.com - Btig cautioned investors that U.S. equities are entering the historically weakest period of the calendar during mid-term election years, with the equal-weight S&P 500 at all-time highs and volatility at year-to-date lows. The firm noted that the equal-weight S&P 500 has gained roughly 16% year-to-date, with every sector now positive for the year.

The research firm said that since 1990, the equal-weight S&P 500 has suffered at least a 7% pullback in the August-October period during mid-term election years in 1990, 1998, 2002, 2010, 2014, 2018, and 2022. The only exception was 2006, which saw a 9% decline from May to July instead. The firm said the index has historically peaked on August 18 on average before a decline into mid-October.

Btig said the market is entering this period with stretched conditions, noting the index trades roughly 11% above its 200-day moving average. The firm also pointed out that 2026 has not yet seen a single 80% downside volume day on the New York Stock Exchange since last October, while the average year sees 21 such days and no year has ever recorded fewer than five.

The firm said long-end U.S. treasury yields ended near their highest levels of this cycle despite dovish data from non-farm payrolls, consumer price index, producer price index, and retail sales over the past week. Since the March decline, the equal-weight S&P 500 has not experienced more than a 2.25% pullback.

Btig recommended that investors pare down risk or consider hedging broad-based equity exposure. The firm said healthcare has historically held up best during the August-October period of mid-term election years, while noting that the semiconductor index PHLX Semiconductor Sector (INDEXNASDAQ: SOXX) failed at its 50-day moving average.

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