The S&P 500 averages a 3.0% return in October during midterm election years, making it the "best month" for stocks. Ryan Detrick, Chief Market Strategist at Carson Group, uses this historical midterm seasonality to forecast a rally, overriding investor fear and election noise surrounding President Donald Trump.
The Historical Midterm Catalyst
According to data spanning 1950 to 2025, the S&P 500 posts higher returns in October during midterm years 73.7% of the time. Detrick stated that the "best month of the year in a midterm year is October."
He noted that November follows closely behind as a catalyst for market growth. Calling it "the second best month of the year," Detrick shared data showing November averages a 2.7% return in midterm years, trading higher 78.9% of the time.
Confronting 'Septemberphobia'
This seasonal fourth-quarter forecast arrives amid a period of elevated market anxiety. Detrick observed that "Septemberphobia is real," pointing to technical indicators such as longtime bulls cutting targets, the American Association of Individual Investors (AAII) showing the most bears since Liberation Day, and the NAAIM Exposure Index dropping 30% over three weeks.
Additionally, a market sentiment gauge recently registered a "Fear" level of 29 out of 100.
Technical Resilience
Despite the fear, the S&P 500 has demonstrated stability. Detrick asked, "Don't short a dull market?" He noted that the index avoided a single 1% drop in September, nor did it gain or lose 1% for a full week for four consecutive weeks. The index continues holding above its early June peak and the upward-sloping 20-week moving average.
While market breadth weakened recently, Detrick pointed out a technical positive: breadth peaked simultaneously with price, whereas major market peaks typically see breadth peak well before price.
How Has the Index Performed?
The S&P 500 currently holds a year-to-date gain of 11.76%, a six-month return of 15.48%, and a one-year return of 15.36%. Maintaining his firm's technical forecast, Detrick stated, "Our call for a choppy to weak first half of September, then a big rally the second half hasn't been a popular call. We still think it is possible."
Looking ahead to the historical October midterm seasonality, Detrick added, "Almost there."
On Friday, the SPDR S&P 500 ETF Trust (NYSE: SPY) and Invesco QQQ Trust ETF (NASDAQ: QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed higher. SPY rose 0.13% to $761.69, while QQQ rose 0.63% to $721.45. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE: DIA), ended 0.25% lower at $515.88.
In premarket on Monday, SPY was up 0.62%, QQQ advanced 0.94%, and DIA gained 0.61%.