One chart shows what stock investors can expect in a critical election year

• The stock market has entered the fourth year of the current presidential cycle.

• Bank of America is giving investors a solid roadmap for how its stock will move over the next 12 months.

• One chart outlines the stock market strategies investors should monitor in 2024, according to BofA.

According to Bank of America, 2024 will be a significant year for the stock market as the fourth year of the current presidential cycle begins.

The fourth year of a presidential term is the second-best year for the stock market, with the S&P 500 historically posting stable median and average returns of 10.7% and 7.5%, respectively, according to data dating back to 1928. are doing. The presidential term is stronger.

One of the ideas behind the strong performance in the fourth year of the presidential cycle is that incumbent presidents seek to provide a final stimulus to the economy through fiscal spending to improve their chances of re-election.

The stock market has historically delivered solid returns and a 75% win rate in the fourth year of a presidential cycle, but that rally has been fairly volatile and doesn’t occur until later this year.

“In the fourth year of the presidential cycle, the average monthly return of the S&P 500 was lackluster from January to May, followed by a summer rally from June to August, a pre-election decline from September to October, and a decline from November to December. “The month marks a post-election bailout rebound,” Bank of America said. technical strategist Steven Suttmeyer said in a note Wednesday.

The best month of the year tends to be August, with an average profit of just over 3% and a 71% win rate. Meanwhile, as uncertainty surrounding the presidential election fades, December is typically the month with the highest likelihood of an increase, with an 83% chance of winning. Finally, May tends to be the weakest month of the year, with an average decline of 1.1%.

Despite the expected bumpy first few months of 2024, Schuttmayer remains confident in equity returns thanks to strong fundamentals across major stock indexes on the verge of a breakout and a high-yield market supporting a risk-on rally. It’s positive. Seen in his last two months of 2023.

“Given the strong rationale in many US stock indexes and plenty of support from other major indicators in late 2023, a tactical hangover in early 2024 should occur ahead of a solid 2024,” he said. I think so.”

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