Investing.com -- The S&P 500 may face a challenging February, particularly in the first year of a presidential cycle, according to analysts at Bank of America.
The bank said in a note Tuesday that historically, February is one of the weaker months for the index, with data dating back to 1928 showing the S&P 500 rising only 53% of the time and averaging a return of -0.09%.
The pattern is said to be even more pronounced in the first year of a presidential term, with the index gaining just 46% of the time and delivering an average return of -1.66%.
“The S&P 500 (SPX) can struggle in February, which is the second weakest month of the year after September,” BofA noted.
However, they note that market conditions tend to improve in the months following February, particularly in the first year of a presidency.
“Seasonality improves after that with the potential for a spring into summer rally,” BofA analysts added, pointing to historical patterns of strength following February before a period of weaker performance later in the year.
Despite near-term risks, technical indicators suggest a constructive market backdrop, according to BofA.
They note that the Nasdaq 100 (NDX) remains in a bullish consolidation phase, supported by strong breadth indicators.
“The advance-decline (A-D) line for the stocks on the NDX probed to a new high last week,” BofA noted, indicating potential upside to the 23,000-23,600 range.
For the S&P 500, the bank believes key support levels lie between 5830 and 5770. They believe a failure to hold these levels could confirm a bearish divergence observed in market breadth indicators, presenting a risk heading into what is typically a weaker month for equities.