We’ve already seen a decline on the same order of declines in mid-election years 1986 and 1994.
This mid-election year stock market activity is very similar to both 1986 and 1994 in scope. In both of those cases there were declines of less than 10%. In 1986 there was one retest of the low (after a failed rally). In 1994 there were multiple re-tests of the low (three failed rallies) in the spring/ summer and fall before the final rally started.
In 2006, the market dropped about 7-8% from the mid-May peak to the early June low and there were several periods in June/July where the market traded significantly below 1250 before moving up in Late July. This is very similar in size to the activity in 1994. We may or may not have another re-test or two at the range of 8-10% below May’s peak or we may be in the rally now. Either way, this year is not really abnormal. It’s following the same script (so far) as the 1986/1994 mid-election year markets.
