Wall Street's hot streak is running into a midterm-year curse: Chart of the Day

This year's stock market rally has taken a turn, as the S&P 500 Equal-Weighted Index has outperformed the traditional S&P 500. The equal-weighted index, which gives each stock equal weight, has risen about 15% in 2026, compared to the S&P 500's roughly 12% gain. This trend highlights the strong performance of average S&P 500 stocks.

However, BTIG technical strategist Jonathan Krinsky warns that Wall Street's hot streak may soon hit a hurdle. Looking at historical patterns, the equal-weighted S&P 500 has typically peaked on August 18 and then entered a challenging period lasting until mid-October. Comparing data from midterm election years with other years since 1990, the equal-weighted S&P 500 has averaged a 6% decline during this period, while other years have shown essentially flat returns.

While the calendar does not necessarily cause stocks to fall, this year's performance diverges from the historical seasonal pattern. In the Aug. 18 to Oct. 11 window, midterm election years have produced average losses of around 5% for the S&P 500, 7% for the Nasdaq Composite, and 8% for the Russell 2000. In other years, these indexes have had flat-to-positive returns.

Krinsky notes that 2026 has not had a single day with falling stocks accounting for more than 80% of volume on the New York Stock Exchange, which is an unusual calm compared to the average year. Additionally, the CBOE Volatility Index has been near its yearly lows, indicating little broad selling pressure and demand for protection.

Given these factors, Krinsky advises caution as summer ends, suggesting it might be wise to reduce risk or hedge equity exposure.