US Stocks Enter Weakest Midterm-Year Stretch, With at Least 7% Correction Possible
JH Kim
Summary
- BTIG said the US stock market is entering the historically weakest period of a midterm election year, increasing the likelihood of a correction.
- BTIG said US equities have high valuations while volatility is hovering near 2026 lows, prompting a recommendation to reduce stock exposure or hedge.
- BTIG said the S&P 500 has seen at least a 7% correction between August and October in midterm election years, while healthcare has held up relatively well and the semiconductor sector is showing technical signs of weakness.
Forecast Trend Report by Period
US stocks are entering the historically weakest stretch of the midterm election year, increasing the risk of a market correction.
On Aug. 17, BTIG wrote that US equity valuations remain elevated while volatility is hovering near 2026 lows. The firm recommended that investors reduce stock exposure or hedge positions.
Since 1990, the equal-weight S&P 500 has typically undergone a correction of at least 7% between August and October in years with US midterm elections, according to BTIG.
By sector, healthcare has historically outperformed on a relative basis, while semiconductors are showing technical signs of weakness.
JH Kim
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