The stock market record run is set to gain momentum in the coming weeks – if history is any indication.

The start of the holiday season is usually a strong time of year on Wall Street, a trend that analysts point to as a reason to remain bullish that the stock market will remain at all-time highs after a turbulent September. .

Historically, November has been the best month of the year for the stock market, both since 1950 and over the past decade, according to LPL Financial.

That’s not all. History shows that the stock market’s strongest six-month period is from November to April, according to the Securities Dealers Almanac. November is also the first month of the best three-month market period, November through January.

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Why is November the best?

This seasonal force is created by a combination of factors. On the one hand, the last three months of the year are generally the best for stocks, with stocks rising 3.8% on average, according to LPL Financial.

Heavy spending by shoppers during the holidays also tends to translate into good quarters for consumer-focused businesses. Some analysts also attribute it to optimism over the holiday season, year-end portfolio adjustments and investors on vacation.

“November is the best month of the year, but it doesn’t seem to be getting as much love as you might think,” Ryan Detrick, chief market strategist at LPL Financial, said in a note to clients. “We all assume December is the best month, but November is actually better and receives very little fanfare. Maybe it should be a month for bulls, not turkeys.

Wall Street avoids a spooky October

While October is often seen as a scary month for investors, gaining a bad reputation following the crashes of 1929, 1987 and during the global financial crisis of 2008, investors weren’t so fearful this year.

After the S&P 500 posted its biggest monthly loss since the coronavirus pandemic began in September, the broad index rebounded more than 6% in October on further signs that corporate profits were rising again after the recession of last year.

“It appears the market has resisted ‘Octoberphobia’ and avoided the dreaded crashes or massacres that gave the month its bad name,” said Jeff Hirsch, editor of Stock Trader’s Almanac, in a note to clients. .

Granted, November was hit during bear markets, when major averages fall more than 20% from a recent high.

For example, November 2000 was the second worst month on record for the Nasdaq Composite, with a technology-focused index plunging nearly 23%, according to Stock Trader’s Almanac. Only October 1987 was worse, and that’s when the “Black Monday” stock market crash happened.

Why investors should be bullish

The US economy slowed significantly from July to September following a series of hurdles, including an increase in COVID-19 cases, supply chain bottlenecks, rising prices at the consumption and mitigating the effects of federal stimulus measures.

But with the decline in COVID-19 cases and the rise in vaccinations, most economists are marking the weak showing a period of weakness in a still vigorous recovery from the pandemic-induced recession, with a healthy rebound expected in recent years. months of the year.

There are signs that there could be more gains to come on Wall Street in the final months of the year on strong seasonal trends, better-than-expected corporate earnings and declining COVID-19 cases . The breadth of the market has also improved, meaning more stocks are joining the rally, a sign of a healthy and strong market.

Unemployment claims have also fallen steadily in recent weeks, with claims continuing to fall below 2.5 million recently for the first time since the start of the coronavirus pandemic.

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After suffering its first 5% decline in 2021 in early October, the S&P 500 came back strong and closed at a record high on October 21. The S&P 500 Index has gained over 20% so far this year, setting more than 50 record highs along the way.

This could be a positive sign for investors in the coming months. The last seven times the S&P 500 had risen 15% for the year before the fourth quarter, this last quarter ended up each time, up 5.8%, data from LPL Financial showed.

“We strongly believe that new highs are something to embrace, not fear, and history shows that new highs tend to come in clusters, which has certainly been true so far this year,” according to Detrick .

This article originally appeared on USA TODAY: Stock Market: What’s the Best Month on Wall Street? It’s here!


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