March in a presidential election year may kick off a weak period. Here's why that could be a buying opportunity

Published Fri, Mar 1 202410:02 AM ESTUpdated Fri, Mar 1 202411:52 AM EST

Seasonally speaking, stocks could be in for a pullback as the calendar turns to March in a presidential election year. Wall Street is off to a buoyant start in 2024, with the S & P 500, Dow Jones Industrial Average and Nasdaq Composite all setting new records — in Nasdaq's case, for the first time since 2021 . But history shows a downdraft could just be starting. Typically, March can be a weak month, certainly in the back half, and that can kick off a period of seasonal weakness, according to the Stock Trader's Almanac. An added constraint this year is the seasonal decline that often occurs when a sitting president is running for reelection. "March is known for coming 'in like a lion, out like a lamb' — a little weaker at the other end," said Jeffrey Hirsch, editor of the Almanac. "Stock prices have had a propensity to decline, sometimes rather precipitously, during the latter days of the month," he wrote. Measured since their inception, the Russell 1000 Index has typically fallen an average of 1.1% in March in presidential election years, the Nasdaq Composite has slipped 1.6% and the Russell 2000 Index of small caps has dipped 3%, Almanac data shows. In every March since 1950, the S & P 500 historically rises 1.1%, but the same month in presidential election years scores a smaller 0.4% advance on average. Currently, the S & P 500 is trading around the 5,100 level. But Hirsch advised investors to watch S & P 500 support levels closer to 4,800, the prior all-time high, or 4,600, the high from the summer of 2023. A buying opportunity Even so, Hirsch said a decline is hardly "sinister." That's because Hirsch anticipates the S & P 500 will rise to 5,500 by year-end, so any dips may prove a buying opportunity for investors. Specifically, he expects markets will perform better in the second half of 2024, when investors get more clarity on the path for interest rates after getting past the March seasonal low and some customary choppiness. Notably, stocks may rally at the end of the year after investors learn the outcome of the November general election. The "market really loves when we have an election where we get to know who won quickly," Hirsch said. "After the election, no matter what happens, it's in rally mode November, December and a little bit steeper if you've had an unpopular president ousted — just that postelection rally." A strong February Hirsch isn't the only one who expects a March consolidation will give way to further gains. Technically speaking, Fairlead Strategies' Katie Stockton wrote that her indicators "support consolidation in March within the context of positive intermediate-term momentum," adding that she has "no indicators of a major pullback at this time." Sam Stovall, chief investment strategist at CFRA Research, said the S & P 500 could see a 5% to 8% pullback in March, arguing that stocks have not seen a meaningful "resetting of the dials" since rallying off their October lows. In fact, since January, when stocks finally recovered all their 2022 bear market losses, the broader market is now up another 5%. Still, Stovall expects markets could continue to climb after absorbing some of their recent gains. He noted that February closed out with strong gains, as had January, a development he considers bullish for markets. "[I]n the 21 times since World War II that we have had a positive January and February, the market was higher for the full year 100% of the time, with the average total return being 22%." That would mean another great year, not just a good year, for markets in 2024.