Volatility Ahead?
We always get questions about what is ahead for the stock market. Generally it’s hard to predict short term moves. Generally it’s best not to focus on short term moves, but we have been worried about what might happen in November. Coincidentally CNBC.com ran this headline today:
Stock Market volatility ahead of presidential elections typically starts picking up right now. (CNBC.com, Monday, October 7, 9:10 am PDT)
Rob Ginsberg, technical strategist for Wolfe Research, posted this chart representing the price trend of the VIX in previous election years. The VIX, which is commonly known as Wall Street’s “fear gauge” has tended to spike up into early November. As it spikes up, stock prices usually decline.
If history repeats we can probably expect some downward price movement in stock prices over the next few weeks. Ginsberg feels that the S&P 500 is “overdue for a 3% to 4% correction. That is nothing, in the big scheme of things. Particularly since the S&P 500 has “notched its largest gain over the first nine months of the year since 1997.” (Source: Bespoke Investment Group) Carson Group also notes that it’s been the strongest nine months for the S&P 500 in an election year going back at least to 1950.
CNBC.com also reported today that Goldman Sachs is looking past any short term volatility and has raised its 2024 year-end price target for the S&P 500 to 6000 from 5600. That implies 4.3% upside from Friday’s close.
In the year 2000, when the Bush vs Gore election was contested and ultimately decided by the Supreme Court, the S&P 500 sold off approximately -11% from election day on November 6th until it bottomed on December 20th. We suspect that if the 2024 election is seriously contested, and no winner is ratified within the first several weeks, we could see a similar sell off. Unless a real constitutional crisis emerges it’s easy to assume that the sell off would be as short lived as the one in 2000.
Election results aside the stock market’s advance, year to date, seems to be on solid ground. At this time we have no reason to disagree with Goldman Sach’s year end price target.
All the best,
Paul
Paul Krsek
CEO
5T Wealth, LLC
Main (707) 224-1340
595 Coombs St
Napa, CA 94559
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