Market Health

Why November Is So Nice for Investors

Thanksgiving.

Black Friday.

Cyber Monday.

Singles Day.

National Clean Out Your Fridge Day.

Fibonacci Day.

“November Rain” by Guns N’ Roses (which is the longest song in history to enter the Billboard Hot 100 top 10).

That’s a laundry list of reasons you should shower November with love. In fact, I could probably spend the entire 18-minute version of “November Rain” pointing them out.

Most importantly for investors, a lot of these reasons make November a gem that shines brighter than citrine or topaz. So tune out the permabears, the naysayers and the nagging negativity that want to undermine your returns.

November is here… and that means you need to prepare for gains!

A 76% Success Rate

For the past two decades, I’ve been compiling market trends.

I’ve been building historical backgrounds not only on individual companies but also on broader indexes.

But this isn’t me reading tea leaves or some patty you might step in while strolling through a pasture. These backgrounds are based on probabilities, fundamentals, behavioral economics and investor psychology.

And these things are what we use to build accurate insights on what to expect in the month ahead.

From 1996 to 2020, the Dow Jones Industrial Average ended November down a mere six times.

That means blue chips ended the month lower less than a quarter of the time. That’s a very strong trend. And we can see from the above chart that the last time the Dow closed out November with a monthly loss was in 2012 – nearly a decade ago!

November has historically been one of the most consistent months for the market to continue its rally.

And the reason for this is twofold.

As we’ve outlined over the past several months, September is prone to swoons as macro headlines take focus and investors fret over looming third quarter earnings.

October – despite a litany of memorable crashes – is actually a very strong month for stocks. Never buy into the gloom and doom that so many people are eager to peddle about the month. The reality is that all of the third quarter earnings anxiety in September gets washed away as results come in better than expected.

Once again, that was precisely what we saw play out.

The Dow gained more than 5% last month!

That’s the best monthly performance for the index since March.

Now, November is so nice because it is a continuation of October’s momentum. The runway is clear, and investors are full of holiday cheer as the most important shopping season of the year sits on the horizon.

The bull gets the green light to charge as consumers pull out their credit cards.

You’ll Get ’Em Next Season

Last month, I highlighted that October is the beginning of an epic three-month stretch for stocks.

The holiday shopping season is the driver.

Over the last 25 years, the Dow averaged a 2.65% gain in the month of November. The only month when the index historically performs better is April.

A lot of mainstream financial news outlets and uninspired analysts will trot out tired lines about how investors should be afraid right now.

And there are moments – and months – in the markets when you most definitely should be wary.

But once third quarter earnings season begins and the focus clearly turns to the holiday shopping season, an optimism is born that’s very difficult to shake.

Now, part of the reason for this is that the year is almost over. There are two months left. If a company – or the economy – is trailing growth expectations for the year, investors start shrugging and say, “That’s okay… There’s always next year.”

It’s a very “get ’em next season” mentality.

Investors set their sights on fourth quarter spending and the golden prospects of a new year. That keeps the bull upright and on steady legs… at least until January.

Here’s to high returns,

Matthew

P.S. Holiday shopping season is set to swing into full gear this month! Check out last year’s Profit Trends article on it here.

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