Episode summary
Every Midterm Since 1990 the S&P Fell 7% from August to October
Summary
The host says midterm years have historically been weak for stocks, citing a pattern that since 1990 the S&P 500 has fallen at least 7% from August through October in every midterm year except 2006. He treats that as a warning sign rather than a forecast, and says the current backdrop of rising rates makes the setup more uncomfortable for equities.
He also points to heavy institutional selling in US stocks, especially tech, noting Goldman Sachs’ report of a record weekly $21.6 billion sale of Nasdaq futures. But he argues the headline can be misleading because short sales made up 72% of the move, and he explains how banks can short stock on behalf of employees before lockups expire, making some of the selling look more dramatic than it really is.
For investors, his response is defensive but selective: trim weaker positions, avoid chasing names that have run too far without earnings, and reserve capital for better opportunities if the market corrects. At the same time, he says the AI boom is real and could continue creating wealth, so the answer is not to panic, but to be more disciplined and say no more often.
Key takeaways
- The host says the S&P 500 has fallen at least 7% from August to October in every midterm year since 1990 except 2006.
- He says Goldman Sachs reported a record weekly sale of $21.6 billion of Nasdaq futures, but 72% of the move was short sales.
- The host argues some of the selling is distorted by banks shorting stock ahead of employee lockups, using the SpaceX example.
- He says rising interest rates make the current market backdrop more concerning, especially for tech.
- His personal response is to trim weaker positions and wait for better entries if the market cracks 7% to 10%.
Notable quotes
“since 1990, the S&P 500 has dropped at least 7% from August through October in every mid-term year except 2006”
“last week Goldman Sachs reported that we saw the largest weekly sales on record”
“Short sales have dominated the move. You know, basically, they're accounting for 72% of total sales”
“The investment decision happens to be no”
“This AI revolution is actually a very real thing and it's happening and it's creating immense amounts of wealth”
How the episode opens
Good morning. This Dylan Jovine with Behind the Market. Happy Thursday.
Today is Thursday, August 20th. How does the stock market do during mid-term season? I have been asked that question a dozen times in the past, you know, 2 weeks.
So, I finally figured I'd just sit down and do some research and actually answer this question. And you know the funny thing about getting older? If you actually I used to know this, but you have forget things when you get older.
You forget things that you used to know. That is crazy to me as I'm experiencing that. Anyway, some facts for you.
How does the market do during the mid-terms? Mid-term election cycle. Well, since 1990, the S&P 500 has dropped at least 7% from August through October in every mid-term year except 2006.
So, basically, the general consensus is that markets drop during the mid-terms. That is basically what happens most of the time except once since 1990. We'll call it the modern era.
So, basically, markets tend to drop
From August through October. And what does that tell you? And it's interesting.
It says except 2006 because 2006 was an interesting year, but you know, basically, markets tend to drop during mid-terms. And just to emphasize that point, institutional investors have been dumping US stocks, especially tech stocks. You know, last week Goldman Sachs reported that we saw the largest weekly sales on record.
We got hedge funds, asset managers, and other institutional investors sold, what is it? $21.6 billion of Nasdaq futures during the week that ended, which was the largest weekly sale on record, surprisingly. And what's very interesting, and this is where it gets a little tricky, and this is why you got to be careful of these kinds of statistics.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- midterm season stock performance
- s&p 500 seasonal drawdowns
- institutional selling
- nasdaq futures shorting
- ai investment cycle and portfolio positioning
Companies and tickers mentioned
- GS
- Goldman Sachs
Watch the episode
Watch “Every Midterm Since 1990 the S&P Fell 7% from August to October” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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