Jeffrey Saut, chief investment strategist at Raymond James, a widely followed strategist and an unwavering market bull, made two very critical observations Tuesday that are likely to reverberate for stocks going forward.
One, the stock market just made a positive move that has not happened since 1958, the same year that NASA was born and President Dwight Eisenhower, a Republican, was in the White House. Two, Democrats are likely to fail in their effort to retake the Senate and may even fall short in the House this fall.
After a fairly rocky month, stocks closed out July with solid gains, extending the S&P 500’s SPX, +0.28% winning streak to four months. Historically, when the market gains in April, May, June and July of midterm election years, the market has finished higher in that year, according to Saut.
“The history of midterm election years is that stocks become dicey in August, but tend to rally as we approach the midterm elections,” said Saut, in a note. “Also worth a mention is that going back decades shows that when the stock market is up in April, May, June and July in midterm election years, in the two years that has happened (1954 and 1958), after an August Angst moment, stocks have finished the year stronger.”
The S&P 500 was up 0.3% in April, 2.2% in May, 0.5% in June and 3.6% in July. The large-cap index jumped 45% in 1954 and rallied 38% in 1958. So far this year, the benchmark has risen 5.3%.
Even without the added boost from politics, stocks almost always gain in years when the market finished higher between April and July, according to Paul Hickey, an analyst at Bespoke Investment Group.
But perhaps the most interesting nugget in Saut’s report is that he doesn’t expect the Democrats to retake the Senate, and even their ability to recapture the House is uncertain.