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What Can Investors Expect in the Month Ahead?

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How did the S&P 500 do in October?

The index rose 3.7%, with gains widespread as nine of the 10 sectors and 10/130 industries rose. Materials led the way with an increase of 6.6% month-over-month followed closely by Tech (6.4), Energy (5.6), and Consumer Discretionary (5.3).

Telecom fell 0.1% for the sector's first month-over-month decline since June, and was the only sector to fall in October.

The S&P 500 is now up 13.0% since the August 27 bottom, led by Tech (up 18.6%), Consumer Discretionary (16.7), Materials (16.7), Energy (16.3), and Industrials (14.7). (Hat tip: Yardeni Research)

Today, however, we kick off a new month. What, historically, has the month of November been like for equity investors?

Since 1928, the S&P 500’s performance in November has been unremarkable, on the whole, as it gained an average 0.62% (versus 0.58% for all months), ranking #7 of 12 and recording monthly price increases 59% of the time.

However, says S&P’s Sam Stovall, the mid-term elections add a favorable twist. History indicates, but does not guarantee, he says, that once the uncertainty of the mid-term elections has ended, the equity market breathes a sigh of relief and begins a meaningful move higher.

Indeed, during the 20 mid-term election years since 1930, the S&P 500 gained 2.2% in November and posted monthly price increases 65% of the time.

Do strong performances in the S&P 500 in September and October help or hurt the market’s performance during the remaining two months of the year? The answer is both yes and no, says Stovall.

During mid-term election years, he notes, whenever September and October have been positive (like this year), the S&P rose 1.2% in the subsequent November – implying that the market may have used up some of its energy leading up to the elections. In December, however, the market seemed to catch a second wind rising nearly 4% and posting an increase 100% of the time (7 of 7 times).
POSITION:  No positions in stocks mentioned.