Investing.com

Amid heightened market volatility, investor newsletter Stock Trader’s Almanac warns that the recent pullback in the S&P 500 may not be over. Comparisons to past election years reveal familiar patterns, particularly those from 1968.

Historically, election year drawdowns for the S&P 500 have averaged 13.4% since 1952. As of August 5, the S&P 500 was down 8.5%, which is within the typical range but still below average.

The NASDAQ has seen a 13.1% decline, below its election year average of 21.2%.

Previously, support levels for the S&P 500 were set at 5190 and the NASDAQ at 16500. These levels have been breached, indicating that further declines could test April lows of 4954 for the S&P 500 and 15223 for the NASDAQ, reflecting corrections of 12.6% and 18.4% respectively.

The market’s recent selloff mirrors historical patterns, notably from the 1968 election year, marked by political and geopolitical turmoil. The comparison to 1987 has been noted; however, the current market is less extended, with a peak S&P 500 gain of 18.8% this year compared to over 35% in 1987.

Traditionally, August through October is a weak period for the market, and strategists believe current actions align with this seasonal weakness. Though this pullback may feel overdue, it is likely not finished, with potential struggles leading up to the election.

Nonetheless, history provides a silver lining: since 1952, there have only been two losses in the final seven months of election years, indicating that while volatility may continue, the year could still conclude positively.