Timing may not be everything, but we all know it plays heavily into a hit or a miss. And today is a red-letter day on Wall Street's calendar, one that can decide the market's direction for the next couple of months.
But this year, today -- Tuesday, Oct. 27 -- falls just ahead of a crucial stretch of megacap tech earnings, a key Federal Reserve rate decision, and oh-so-close midterm elections.
Market technicians are the ones who have identified Oct. 27 as an important date, one when the autumn lull reaches its nadir and turns the corner for solid gains into the holiday season.
A comeback, in fact, starts the following day -- Wednesday. Since 1928, the S&P 500 has climbed from late July to early September, slumped into late October, then rallied to the end of the year. That path has been followed this year, with the benchmark gaining 3% from midsummer to early fall, then sliding about 1% into Monday.
"From here, it's broadly one-way traffic into year-end in an average year," said Jim Reid, Deutsche Bank's global head of macro research. "With the election a week away, the midterm and end-of-year seasonal tailwinds now line up about as well as the calendar ever allows."
Reid added a caveat that "seasonality isn't destiny, and worries around Iran, AI and France won't mysteriously vanish."
"But if history is any guide," he said, "today is often the day the reindeer wake their master up and the Santa rally starts to rev up."
Bluekurtic Market Insights, a financial research group, points out that the S&P 500 posted gains 18 of 19 times since 1950 in the five days before midterm elections, with a median return of 2.7%.
Scott Rubner, head of equity at Citadel Securities and a former Goldman Sachs managing director, notes the average gain from Oct. 27 to year-end is typically 5%, with that advance at 6% for election years.
Rubner also noted another positive -- improvement in market breadth, with an equal-weighted index of the S&P 500 outpacing the Nasdaq 100 by 8.1% since the end of September.
"After months of increasingly concentrated index performance, the recent improvement in participation is encouraging, particularly as earnings begin to test a much broader group of companies," he wrote in a note.
Adam Turnquist, chief technical strategist at LPL Financial, shares that view. He noted that the S&P 500, which edged just 0.3% higher for the month into Monday's close, would be up 2.5% but for the underperformance of tech heavyweights such as Alphabet, Nvidia, Meta Platforms, and Micron Technology.
But Turnquist is also worried about the lack of participation from megacap tech stocks and the muted price action of the benchmarks like the S&P 500 and the Nasdaq Composite.
"Follow-through buying will be needed to confirm that the recovery is sustainable rather than a temporary relief rally from oversold conditions," he said.
Sonu Varghese, chief market strategist at Carson Group, also wonders if the market's improving breadth masks a bigger concern.
For the past four years, since the current bull market began in the autumn of 2022, AI stocks have led extraordinary gains for the S&P 500. An index of AI stocks tracked by Goldman has soared 353%, more than triple the benchmark's gain. Non-AI stocks gained 49%.
That trend, however, started to weaken in late June, just as the PHLX Semiconductor index reached its all-time peak, and has narrowed significantly since then. AI stocks, in fact, are suffering their worst rolling six-month returns, measured as excess to non-AI stocks, since the bull market began.
"Something seems to have shifted," Varghese said. "It's one thing for non-AI stocks to lead for a week or month, but this reversal has lasted longer."
That puts the market's next few days in sharp focus: earnings from Alphabet, Microsoft, and Amazon, Wednesday's Fed rate decision and next Tuesday's midterm elections.
Data going back to 1950 also suggests that Oct. 28 -- Wednesday, tomorrow -- is traditionally the market's strongest single day of the year, according to Ryan Detrick, Carson Group's chief market strategist.
But this year's backdrop -- a hard-to-read Fed, accelerating oil and energy prices, and broader fatigue in massive AI investments story, is very different.
"This remains a very difficult market with so many cross currents," said Ken Mahoney, head of Mahoney Asset Management.
"We feel as though there is still a window of opportunity to turn between here and after the midterms, and understand the historical seasonality, but we are going to need to see far more signs of change first," he added.
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