Why the 'immaculate' stock market might not stay that way long

A near-perfect stock market enters a more volatile phase due to historical patterns during mid-term election years, according to BTIG strategist Jonathan Krinsky. Over the past eight mid-term election years, including 1990, 1998, 2002, 2010, 2014, 2018, 2022, and 1994, the market has experienced a 7% or greater pullback between August and October.

Krinsky suggests that investors should consider reducing risk or hedging equity exposure during this challenging period in the calendar. The S&P 500 (^GSPC) is currently at a record high because of strong second-quarter earnings, with 86% of companies reporting EPS growth above Wall Street estimates, the highest since 2021. Despite this positive data, historical patterns indicate that the market could face difficulties in the coming months, leading Krinsky to advise investors to be cautious and prudently manage their risk exposure.