November is one of the better months of the year for many key stock market indexes in the past seventy years and most recently over the past two decades. It is also the start of the stock market’s bullish six-month period from November to April.
With less than two months before the end of the year, many key indexes are showing double-digit year-to-date gains. The S&P Index (SPX – 4,649.27) has skyrocketed 23.78% YTD, Dow Jones Industrial Average (INDU – 35,921.23) appreciated 17.36% YTD, Nasdaq Composite Index (COMPQ - 15,704.28) gained 21.85% YTD, Nasdaq 100 Index (NDX – 16,032.47) jumped 24.40%, S&P 400 Mid Cap Index (SML – 2,893.27) added 25.43%, and S&P 600 Small Cap Index (SML – 1,457.03) accelerated 30.22% YTD.
As expected, with two weeks into the month, most indexes are comfortably higher. November retains its top-performing stock ranking due to the influx of money, including fourth-quarter cash inflows from professional money managers and institutional investors. With the upcoming holidays, investors tend to be optimistic, which translates into higher stock prices for the month.
For the SPX Index, November is the second-best month of the year. April has emerged in recent years as the best month of the year, averaging gains of 2.4% for the month. Since 2012, November has produced consecutive gains with no losses. From 1950, the average November returned gains of 1.6% and 1.9% in the past twenty years. The day before and after Thanksgiving favors the bulls, as SPX is up over 75% of the time. Since it is also the start of the best six months of the year for stocks, investors tend to anticipate this trading phenomenon by increasing their bullish stock positioning in November. By December, SPX has tacked on another 0.7% average gain to end the year.
Like SPX, the Dow Jones Industrial Average is bullish during November. November and April are the two best months of the year. In the past twenty years, INDU has returned on the average gains of 2.2%. The seasonality strength continues into December with average gains of 0.8%.
In the past 20-years, COMPQ has had average gains of 2.2% during November, tying October as the second-best of the year behind April’s 2.3% average gains. December is also respectable, producing average gains of 0.5%.
The technology-laden NDX has returned on average a return of 2.0% during November, placing it as the fourth-best month of the year, just behind April (2.3%), July (2.5%), and October (2.9). Surprisingly, NDX eked out nominal gains of 0.1% during December.
MID appreciates strongly into the last two months of the year. It is the best month of the year, with average gains of 2.8% during November and 1.0% during December.
Small caps (SML) produced half of the yearly returns in the last three months of the year. 0.8% in October, 1.9% in November (third-best month of the year), and 2.1% in December (second-best month), ahead of the January Effect when small-cap stocks excel into late-December and early-January.