The indices are likely to pull back and consolidate recent gains in the second half of May. Since 1885, May has been up 55.2% of the time. From May 15 to 31, this percentage falls to 50.0%. The best May occurred in 1931 when the Dow Jones rose by 9.1%, and the most bearish month was in 1940 when the market fell by 20.2%. Chart 1 depicts the average expected daily return in all Mays that have occurred in an election year. On average the market has fallen by about 3.5%.

This is a static cycle in that it changes slowly over the years. We con