As the November US Presidential election draws near, the stock market is bracing for potential volatility. Bank of America has pinpointed several key dates that could significantly impact the S&P 500 index. The bank, using options prices to predict market movements, sees the day after the election, November 6th, as the most significant date, with an estimated 2.5% move in either direction.
Other dates of note include October 4th and November 1st, when nonfarm payroll reports are released. These reports could trigger a 1% move in the S&P 500. October 21st marks the start of major tech companies’ third-quarter earnings announcements, another critical period for market watchers. The release of the September CPI data on October 10th is also on the radar, although its impact is expected to be less significant than the labor market data. The Federal Reserve’s recent interest rate cut has shifted the focus from inflation to labor market indicators.
The heightened anxiety surrounding the election is reflected in the predictions of several analysts. Stifel recently warned of a potential 12% market drop by the end of 2024, citing high valuations and speculative risks. Chief equity strategist Barry Bannister predicts a correction to the low 5,000s for the S&P 500 by the fourth quarter. In early September, Tom Lee, a prominent equity strategist, anticipated a 7%-10% market pullback, urging caution but also advising investors to be ready to “buy the dip.” Lee highlighted September’s historical weakness for stocks, noting the S&P 500 has averaged a 0.7% loss every September since 1950.
Market strategist Jay Woods, in an interview, discussed the potential impacts of the election year and Federal Reserve rate cuts on the stock market. He highlighted the Fed’s expected rate cut in September, occurring as investors grapple with predicting market movements amidst the 2024 presidential election. Woods believes the Fed has been slow to react, both in raising and cutting rates, adding to the market’s uncertainty.
With the election looming and economic indicators fluctuating, investors are preparing for a volatile period in the stock market. Understanding the key dates highlighted by Bank of America and other analysts is crucial for navigating the potential ups and downs ahead.
