Historical Data Suggests Final 2026 Stock Dip May Be Imminent, Deutsche Bank Says

A historical analysis of stock market seasonality suggests that U.S. equities may be at or near their final bottom for the year, potentially paving the way for a year-end rally. In a note on Tuesday, Deutsche Bank’s Global Head of Macro Research, Jim Reid, observed that the calendar is now aligning for both typical year-end and midterm election tailwinds.

Seasonal Patterns Signal a Trough

Reid's analysis examined the average path of the S&P 500 throughout the calendar year since 1928. He noted that a typical year sees the index peak around September 2 before hitting a low on September 30, followed by a brief bounce and one last dip that bottoms out around October 27.

From that point in late October, Reid stated that the market has historically seen "broadly one-way traffic into year-end," a phenomenon often referred to as a "Santa rally." This pattern suggests that the current market weakness could represent a final buying opportunity before a seasonal uptrend.

The Midterm Year Factor

This year's midterm election cycle adds another layer to the seasonal analysis. According to Reid, midterm years typically see the S&P 500 peak in late April and decline by about 4% to 5% into an early October trough as election uncertainty weighs on investor sentiment.

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This historical precedent is strong: in 21 of the last 23 midterm election years, the S&P 500 was higher over the three months following the early October low. Reid believes 2026 has followed a "gentler version" of this script, with the S&P 500 hitting a record on May 29 but gaining less than 1% in the nearly five months since.

A Note of Caution

While the seasonal data appears favorable, Reid cautioned that historical averages are not a guarantee of future performance. He emphasized that "seasonality isn’t destiny" and that averages can hide significant dispersion, including bear markets in some past midterm years.

He also noted that current geopolitical and economic concerns, such as those related to Iran, AI, and France, will not simply disappear due to the calendar. Still, he concluded, "if history is any guide, today is often the day the reindeer wake their master up and the Santa rally starts to rev up."