Midterm years are historically bad for stocks. The trade is already forming.

The S&P 500 is at record highs and the four-year political cycle says that is the warning, not the all-clear.1 Across nine completed midterm cycles since 1990, the index has averaged a maximum drawdown of -17.58% with the trough printing in Q3 or Q4 in 7 of 9 cycles and clustering most often in mid-October.1 The trade is not selling in May, it is having a buy list cocked for the back half of the year, because the 12 months after the midterm trough have averaged +26.34% in price return with positive outcomes in 9 of 9 cycles.1