Markets are in for a rough two months with September and midterm elections incoming

Has the recent market rally got you in a bullish mood? Not to burst your bubble, but you might want to turn down the expectations.

Thanks two a two-month 17% rally between June 16 to August 16, the S&P 500 is only down 13% for 2022 — recovering from its 18% loss in June.

Manifesting a downturn: Investors have been divided over the market’s direction — with large bank analysts calling for further moves down. And they’re getting what they asked for…

• In the past five days, the S&P 500 has fallen nearly 4%, and crypto prices have also fallen in the past week.
• After nearly breaking $2,000 in mid-August, Ethereum ($ETH) has fallen back below $1,600 ahead of its anticipated September Merge.

Here are two data points that should scare investors for September and October:

• September is the worst month historically in the market. The S&P 500 averaged a 1% loss in September, going back to 1928.
• Stocks tend to struggle leading up to the midterm election years — with uncertainty around policy changes.

But markets tend to rebound after the elections are done. This year, the midterm elections are being held on November 8.

What’s next? According to the Chief Investment Strategist of BMO Wealth Management, the market narrative has shifted from “the potential for a recession” to “hopes that inflation may be peaking” (BBG).

Economic data over the next couple of months could dictate the market’s direction. Now, let’s all do our part and manifest positive economic data and a major market rally by the end of the year. See you on the other side.