Which sectors of the S&P 500 perform best during the US presidential election? Via Investing.com

It often faces headwinds in September-October during US presidential election years, but historically rallies in November-December, according to Bank of America’s (BofA) latest market commentary.

The BofA note released on Tuesday highlighted trends in sector performance, showing financials, staples and utilities tending to outperform ahead of the election, with energy and materials gaining momentum afterwards.

In the historically weaker September and October months of election years, the financial sector stands out as the strongest sector, posting an average return of 1.42% over the past century.

Commodities and utilities followed, with returns of 0.51% and 0.30%, respectively, over the same period. However, while Staples and utilities tend to fade after the election, the financials remain strong.

“Financials rank third in November-December with an average return of 4.19%,” BofA analysts noted, while staples and utilities drop to 10th and eighth, respectively.

According to the data, energy and materials show a more significant recovery after the election. Energy, which has averaged a modest return of 0.18% in the pre-election period, climbs to second place in the last two months of the year with a gain of 4.35%.

Materials, which tend to struggle before elections with an average return of -3.69%, see the most dramatic post-election change, coming in first with an average return of 4.77%.

However, the technology and healthcare sectors have historically underperformed during both periods.

“Tech ranks ninth in September-October and seventh in November-December, while healthcare ranks eighth and sixth, respectively,” BofA noted.

The BofA analysis also highlighted the importance of seasonal strategies, suggesting that investors could capitalize on the S&P 500’s expected rebound by buying into sectors such as industrials, telecommunications services, healthcare, technology and materials during the weak September-October period.

Looking at performance from Labor Day through Election Day and beyond, the financial sector dominates again, ranking first in the pre-election period and second after the election. Basics and utilities also perform well before elections, but tend to underperform in the post-election rally.

On the other hand, technology, communication services and real estate have consistently struggled in both periods, delivering negative average returns.