August Highs in a Presidential Election Year are Super-Bullish

Image of bull statueIf bears are waiting for summer doldrums to start kicking in, the S&P hitting new highs in August may keep them waiting a lot longer. August tends to be a very weak month going back in history. Some blame vacation time perhaps and a lack of investor interest, allowing for volatility to become more pronounced.

LPL Research, along with FactSet data, highlights the month of August and its historical performance averages in this chart below:

president-bullish-august

Now looking at the chart of the how August highs in a Presidential year affect rest of the year returns, you can see why making a bet against this current market may not be worthwhile:

spy-highs-election-year

There are plenty of catalysts to drive S&P stocks higher right now. We have M&A really starting to catch fire, and even when there aren’t actual deals announced, rumors of potential marriages are enough to get stocks pushing higher.

Earnings beats have been consistent, with companies raising guidance really seeing prices spike. Share buybacks continue to grow consistently, and as we know, less shares floating around will drive EPS estimates higher. Lastly, the election year is impacting investors, but not in the way some cautious analysts were expecting, with two such polarizing candidates making headlines in an often embarrassing way.

So if history serves us right, investors may not want to take their foot off the gas when it comes to buying market pullbacks whenever they occur.

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