Just seventeen days ago, the S&P 500 Index made a new all-time closing high, re-confirming the multi-year “AI”-driven rally. All of the big post-election gains we saw from mid-November through mid-February have been fully erased, and markets are now back to square one from where they stood just over four months ago.
Looking on the bright side, you now have a chance to get in if you missed out on those post-election gains. Valuations have gotten much more attractive in the blink of an eye. (At least a lot more attractive than they were last month.) And if you’re worried about tariffs or any other topic du jour, remember that the market will likely be thinking about something totally different a few weeks from now. Remember a month or so ago when higher rates were the big concern? Or a couple of weeks ago when it was DOGE Cuts? Interest rates have dropped since then, and earlier this week, DOGE got throttled by the president and the Senate. If you’re thinking long-term, getting riled up about day-to-day noise is not healthy. It usually just causes you to make mistakes in your long-term plans.
One thing for sure is that markets have gotten off to a totally different start to Trump’s second term than during his first term. Below is a look at the S&P 500’s percentage change following his first Inauguration through the end of 2017 versus its percentage change since Inauguration Day this January.
Below, I highlight the S&P 500’s performance in the 34 trading days after all Inaugurations since 1945 and the index’s performance for the remainder of those years. The 4% drop since Inauguration Day is the worst since 2009 when the S&P fell 19.6% in the 34 trading days after Obama’s Inauguration. That drop makes the current one look puny!
Notably, though, Republican Presidents have seen weakness early on and continued to see weakness through the end of the first year, so the action this time is not a big outlier.
Moving on to the Nasdaq, I keep a chart that compares the Nasdaq index performance following the release of ChatGPT versus its performance following the release of Netscape, and things continue to track closely. When I look at how the Nasdaq has performed following the release of ChatGPT compared to its performance following other major technological releases of the last four decades, its action following the release of the Netscape web browser is easily the most correlated.
Towards the end of last year, I noted that if the post-ChatGPT pattern continues to track, we’re due for some weakness for the next few months. As you can see in the updated charts below, that weakness is now here. But if the patterns continue to track, we’ll resume the uptrend again in another month or so, and then it’ll be off to the races higher again. Fingers crossed!
Of course, none of these comparisons and presidential outcomes guarantee an outcome. As I stated earlier in this post, letting the current fluctuation impact decision-making is usually a mistake.
One last point: The market has been hit hard during regular trading hours since the S&P’s peak in mid-February, but it has done well after hours. Since Election Day, the SPDR® S&P 500® ETF Trust, SPY, is now down 1.8%, but if you only owned it after hours by buying at the close every day and selling at the next day’s open, you’d still be up 3%. Had you done the opposite and bought SPY at the open every day and sold at the close, you’d be down 4.6%. This type of negative intraday action is a hallmark of corrections, and bulls, which I am, should want to start seeing intraday strength like we saw Friday on a more consistent basis.
Feel free to call me or your advisor with any questions.
(1) Charts by Bespoke.com.
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