How could Jim Reid's analysis of seasonal market strength affect the US Dollar?
US Dollar demand may rise if seasonal market strength drives S&P 500 rally This optimism, coupled with expectations that S&P 500 earnings will rise roughly 30% year over year, could increase investor confidence in US assets. Increased demand for US equities and related financial instruments typically supports the valuation and demand for the US Dollar.
- Effect
- Mild positive
- How direct
- 2 steps, 1 inferred by Brind
- When
- Within weeks
- The story
- Gone quiet
How it reaches US Dollar (Next day)
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Jim Reid of Deutsche Bank stated that markets have entered a historically strong seasonal period ahead of the midterm elections. He noted that the S&P 500 has risen in 21 of the last 23 midterm election cycles. Furthermore, S&P 500 earnings are currently expected to rise about 30% year over year, which could provide a tailwind.
The full event1independent outlet -
Jim Reid pointed out that the market has entered a historically strong seasonal period, suggesting the S&P 500 could rally into year-end. This view is supported by the fact that the S&P 500 has risen in 21 of the last 23 midterm election cycles, with a median return of 7% over the three-month window surrounding the midterms.
1 report connects these two. Brind only summarizes; follow a link to read the reporting itself.
- aol.com Oct 9
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German global banking and financial services company
Everything about Deutsche Bank -
The expectation of a strong rally, further bolstered by S&P 500 earnings expected to rise roughly 30% year over year, provides a useful tailwind for market optimism. This increased confidence in US financial performance typically translates into higher demand for the US Dollar.
No report states this step directly. Brind drew it from the reporting on each side of it, so treat it as an informed guess.
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Distinct currency with ISO 4217 code "USN", defined for trade purposes
Everything about US Dollar (Next day)
Tap any step to see the evidence behind it.
The facts so far
As reported. Each one links to where it comes from.
- The S&P 500 has risen in 21 of the last 23 midterm election cycles, from one month before the election to two months after.aol.com
- The median return for the benchmark index over the three-month window surrounding the midterms is 7%.aol.com
- S&P 500 earnings are now expected to rise roughly 30% year over year.aol.com
Why it matters
The US Dollar's trajectory is heavily influenced by market sentiment and the perceived health of US equities. If the seasonal pattern holds and the S&P 500 rallies, it signals strong investor confidence in the US economy, which generally supports the dollar's valuation. This optimism is particularly relevant given that markets have recently experienced a rates sell-off.
However, history shows exceptions to this seasonal trend, such as 1978 and 2018. These downturns were linked to specific factors like rising inflation and interest rates, or concerns over the US-China trade war, demonstrating that external economic pressures can override historical seasonal patterns.
What we don't know yet
- Will the expected 30% rise in S&P 500 earnings be sufficient to overcome recent rates sell-off concerns?
- Will any specific policy actions by the Federal Reserve change the market's seasonal outlook?
Is this still moving?
- Reports
- 2
- Developments
- 1
- Repetition
- 50%
What would change this answer
— Other considerations
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Reporting
- aol.comOct 9
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Brind's analysis is written by AI from the reporting linked above and can be wrong. This explainer is a possibility worth considering, not a forecast: steps marked as Brind's reasoning are not stated in the reporting. It is not investment advice; do your own research.