March is set to be the worst month for the S&P 500 (SPX) since 2022 with the benchmark index down by 7.6%, although seasonality suggests that more pain could be on the horizon.
Claim 30% Off TipRanks
New trading tool for QQQ bullsIn the second quarter of the second year of a presidential term, the S&P 500 has historically fallen 2.8%, the worst quarter of the four-year cycle, according to FactSet data going back to 1950 compiled by Carson Investment Research.
Prepare for a Midterm Year Drawdown
Furthermore, the average max drawdown for midterm election years going back to 1950 is 16.1%, while the median is 15.6%. On the bright side, the average one-year forward return following the drawdown is 36.4% and the median is even higher at 39.8%.
Investors should remember that stock market selloffs are actually quite common and are a normal part of investing. Since 1980, the S&P 500 has experienced an average annual drawdown of 14.1%.