Something for the bulls: November is typically the best month for the stock market

Published Tue, Oct 31 20237:35 AM EDTUpdated Tue, Oct 31 20237:46 AM EDT

Wall Street may have some optimism to look toward if past market trends hold true into next month. November is typically an outperforming month for Wall Street, according to data from the "Stock Trader's Almanac." The benchmark S & P 500 and the Dow Jones Industrial Average have each historically posted an average gain of 1.7% in November, dating back to 1950. Meanwhile, the tech-heavy Nasdaq Composite has climbed an average of nearly 2% in November, dating back to 1971. Those moves make November the strongest month of the year for the S & P 500 and the second-best month for both the Nasdaq and the 30-stock Dow, according to the almanac. The potential move higher for the key indices would be a welcome reprieve after a rough October . The S & P 500 has slipped roughly 3% so far and is on track for a third-straight month of declines . The string of monthly losses would mark the first such occurrence for the S & P 500 since the height of the Covid-19 pandemic in 2020. November is also pivotal as it marks the beginning of the tactical season switching strategy laid out in the almanac. The "best six months" period outlined in the almanac shows that the strongest gains for the stock market span from November to April. This sets up investors for a buying period that's about to begin. Indeed, Jeff Hirsch, editor in chief of the "Stock Trader's Almanac," thinks we may have already reached an October bottom, thus falling in line with the seasonal history for a climb higher in November. "Using the history of the seasonal cycles and the patterns that we look at, [we've] set up a very typical late October low potentially, and we listen to our history and we listen to our cycles and that's what it's telling us," he said. Hirsch added that the promising economic backdrop, coupled with some of the stronger quarterly results from the current earnings season, also supports the case for a climb in equities in November and could keep market moves in lockstep with the seasonal history. "There's been some decent earnings, there's been a couple of misses, there's been some decent economic numbers, so it's all set up for us just to buy in October and get our portfolios sober," he added. Macroeconomic and geopolitical headwinds remain, which could derail the November bounce from fully being realized. "We've got all of this turmoil out there that can change anything, [but] right now it doesn't seem to be something that's totally derailed the seasonal patterns," he said. Hirsch added there would be cause for concern if a typical end-of-year rally doesn't come to fruition from the end of December into January and would be the biggest sign of worry that markets could be breaking with the seasonality trend. "If stocks don't rally during November and December, [and] especially during the pre-election year, we're gonna get concerned," Hirsch said. "When the market doesn't go up during the bullish season, there's other things that are more powerful at play, and when that season's over they're really going to have their say."