S&P 500 is at record highs, but beware of October’s choppy background for the index
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Trevor Williams
The S&P 500 (SP500) on Friday clinched another record closing high for 2024 and extended a weekly win streak, but with more trading days left in October, Barclays suggested investors be mindful of the month’s rough history for the benchmark.
The large-cap index (SP500) scored its 47th peak close this year, at 5,864.67, on Friday, and logged its sixth straight weekly advance, up 0.85%, the longest run this year. So far in October, the index was up 1.8%, on track for its sixth consecutive monthly rise.
But what may leap out from behind the index’s largely upbeat performance is a history of downside pressure in October. The month usually delivers a 5.3% average drawdown for the S&P 500 (SP500) versus a 4.2% average across other months of the year, going back to 1928, Barclays said in a research note Friday, sharing this chart:
“We would point out that the busiest weeks of 3Q24 earnings are also waiting in the wings, and with valuations high, implied moves elevated and revisions sharply negative, U.S. equities could be in for a choppy ride until October is in the rear view,” Barclays strategists led by Venu Krishna said.
While there’s a “potential overhang” from the U.S. presidential election in November, Krishna said analysis by Barclays’s derivatives strategists of implied moves around the race and the S&P 500’s (SP500) performance in election years versus non-election years indicates that seasonality – not the election – is the key driver.
October follows Q3, which tends to be the most challenging for U.S. stocks, as it carries a median drawdown of -6.9% during down quarters, Barclays said. This year, the S&P 500 (SP500) pulled out a 5.9% gain for Q3, overcoming a summer selloff that dragged the index into a near-correction.
The benchmark has risen 23% in 2024. Next week, a wave of corporate earnings are due, including from Tesla (TSLA), Boeing (BA), Coca-Cola (KO) and General Motors (GM).
Here are some ETFs that track the S&P 500 (SP500): (RSP), (SPY), (SH), (VOO), and (IVV).