What does the ‘midterm election’ mean for the U.S. stock market?

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S&P 500 will likely take another month before it bottoms, says Mark Newton. He’s the Global Head of Technical Strategy at Fundstrat Global Advisors.

A lower low is unlikely

His forecast suggests the market will tumble between now and somewhere in October.

Nonetheless, Newton doesn’t expect a break below the June low and recommends that investors look for opportunities as the benchmark index bottoms next month. On CNBC’s “Closing Bell: Overtime”, he said:

Markets will likely bottom in October and trend higher through the seasonally bullish Q4. But we shouldn’t get under June lows. My thinking is it’ll be a 10% decline that will end up being a buying opportunity.

FOMC is scheduled for its next policy meeting on September 21st. The decision, of course, will be based on the inflation data this week – neither of which, Newton is convinced, will make the U.S. equities slip to a new low.

What will drive the move up?

In July, consumer prices eased to 8.50% in the United States as we published here. Newton expects “that” and the midterm elections to drive upside in the final quarter of 2022. He noted:

Midterm election years that tends to be the best part of the year with inflation starting to come down, we’ll see gas prices falling down which might create a more contentious midterm election. This will fuel market gains between October and year-end.

Gas prices have already come down about 30% over the past three months.

U.S. midterm election is on November 8th. As per Reuters, 57% of Americans currently disapprove of President Biden. At present, the S&P 500 is down about 8.0% from its high in mid-August.

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