Seasonality graphs work well to predict market outcomes in 2023, and current seasonality graphs indicate future declines. Is this a pattern or just a situation?
Yahoo Finance's Jared Blikre joins the live show to break down the latest market numbers and let investors know how accurately seasonality charts can predict market trends in 2024.
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
video transcript
– Will the rally turn around soon? The seasonality graph predicted many outcomes for 2023. And if you use the same tool, the latest graph shows you're in for a dip.
Of course, Jared Blikre is looking into that. So maybe he will go beyond just today.
Jared Breichle: Maybe it will go beyond just today. Yesterday's semi-finals highlighted a few weaknesses. But guess what?
I made a map at the beginning of the year. And I'll show you that in a moment. However, this is just an average monthly return.
What we see here, and what I want you to pay attention to in February, is that no matter how you slice it going back to 1949, regardless of whether a Democrat becomes president or not, there are negative returns for three presidential cycles. This means that you can get So I wanted a little more granularity. This is the model I used last year with very good results.
And you can see that the market is generally bullish from July to the middle of the year. And coincidentally, that's when we got lost for a few months last year. And as you can see, it increases again in September and October. Then, perhaps Santa Claus will gather.
But to avoid getting too ahead of ourselves, I'd like to focus on this small downdraft. From mid-February to the end of February. And there are a few different ways to look at it.
But this is one potential tipping point. And this would actually coincide with the downdrafts that we're seeing today. Now, here's a completely different look.
This is the average of VIX. In other words, when it goes up, the VIX goes up too. This means that stock prices will go down.
This time around, the VIX shows a very similar seasonal pattern from mid-February to early March. And if this happens, and it's starting to happen today, and we're starting to see the VIX go up even more, this probably means we're in that state or just accepting what's coming. I will.
Now, I'd like to end here by showing you that this is a purple map with just the S&P 500 and CPI days. And this goes back to the beginning of the pandemic. And we can see that the CPI days primarily track the general market.
But since the end of the bear market last year, which actually ended in 2022, we haven't had a big CPI intraday downdraft. So is this a big change? Potentially, I think we'll see some weakness in the short term, at least through the end of the month.
– Jared, thank you so much. appreciate.
