Carson Group strategist Ryan Detrick just delivered a blunt message to worried investors, calling the February stock market swoon “healthy” and a toll we pay to profit from owning stocks over time.
The message rings true for long-time investors, like Detrick, who have seen remarkable post-selloff gains over the years, including after major drops such as the Internet bust, the Great Recession, the Covid pandemic, and 2022’s 25% tumble.
Detrick labels the current sell-off as an expected pause during a mid-term election year. As I previously explained, the second year of the four-year Presidential cycle is notoriously volatile, with an average decline of 17.5% since 1950.
The potential risk of a similar decline this year shouldn’t be ignored, but investors should also remember that mid-cycle drops have paved the way for robust returns in the following 12 months.
Detrick explains why market drop sets the stage
A Chartered Market Technician, Detrick’s Wall Street career stretches back over 20 years, including over a decade at Schaeffer’s Investment Research and six years at LPL Financial.
His two decades-plus of experience mean he’s navigated some tough drops and made some impressive calls along the way. In 2025, his S&P 500 year-end prediction was nearly perfect, despite a massive near 20% decline in the spring during the tariff tantrum.
TheStreet/Stock Traders Almanac
The February tech tumble, especially the SaaS-apocalypse that hit software stocks, may prove to be simply another speed bump. Detrick believes that when all is said and done, 2026 will be another year of double-digit gains, likely between 12% to 15%, for the market, despite mid-cycle year volatility.
“The Dow is up 9 months in a row, and we are in the banana peel month of February,” wrote Detrick on X. “Yes, they might blame it on AI or something else, just know a little pause here and now is perfectly normal and probably healthy.”
Related: Investors quietly pile into a group of stocks for 2026 (it’s not tech)
Detrick pointed out earlier this month that down Februarys aren’t rare.
“February has been lower three of the past four years, four of the past six years, and five of the past eight years,” wrote Detrick in a Carson Group blog post.
February S&P 500 returns (past five years):
- 2025: -1.4%
- 2024: 5.2%
- 2023: -2.6%
- 2022: -3.1%
- 2021: 2.6%
And February’s “banana peel” slide doesn’t necessarily mean bad news for stocks, especially given positive returns in January usually portend higher prices.
According to Jeff Hirsch’s Stock Trader’s Almanac, February ranks 11th for S&P 500 average monthly returns since 1950, losing 0.02% on average, yet when Januarys are positive, like in 2026, they finish the year flat or up 84% of the time.
Once things settle down after the mid-year elections, stocks tend to perform better.
“Since 1950, the average one-year return following a midterm election was 15.4%. That’s nearly twice the return of all other years during a similar period,” wrote Carson Group’s Matt Miller and Chris Buchbinder in January.
Stock market resets as sectors rotate
The S&P 500 has been flirting with all-time highs since January 28, when the benchmark index posted an intraday high of 7002, prompting profit-taking and a sideways-churning tape through mid-February.
While the S&P 500 is only down about 2.2% from its peak, that return masks a major reset in technology stocks, which had been largely responsible for the stock market delivering three consecutive double-digit annual returns through 2025.
The SPDR Technology ETF (XLK) has tumbled 8.5% since its peak last Fall, and the SPDR Software ETF (IGV) has crashed 30%.
A major sector rotation is why the S&P 500 has been able to offset much of the pain in technology. Previously ignored baskets that hadn’t performed during the AI-driven rally are playing catch-up, including energy and healthcare.
The SPDR Energy Select ETF (XLE) is up nearly 22% in 2026. The SPDR Healthcare ETF (XLV) is up 13.7% since September.
The rotation, which I discussed in early January, hasn’t just propped up the S&P 500’s year-to-date returns. It’s also boosted fortunes for the small-cap Russell 2000 and Dow Jones Industrial Average, both of which are less exposed to technology than the S&P 500.
The Russell 2000 ETF (IWM) is up 5.5% year-to-date. The most heavily weighted sectors within it are Industrials (18.99%), Financials (17.39%), and Healthcare (17.08%), according to BlackRock. Technology represents less than 14%, while it makes up 35% of the S&P 500.
Related: Energy stocks surge as basket tops proprietary ranking
