Never mind what has already been a strong six months for stocks. The market is about to embark on what is historically its best six-month stretch of gains. Historically, the November to April period has seen stocks notch their highest average return the greatest number of times going back to World War II, according to the “best six months” thesis popularized by the Stock Trader’s Almanac . The S & P 500 typically advances about 7% from November to April, compared to the index’s average 2% rise from May to October, according to CFRA Research chief investment strategist Sam Stovall. During the six-month span from November to April, stocks have risen 76% of the time since 1945, while during the period from May through October, stocks have advanced 66% of the time. Even greater gains have been scored by small caps, at least in data going back to 1979, when data began. The Russell 2000 index, for example, has historically added more than 9% from November to April, rising in price 73% of the time. So far in 2024, the Russell 2000 has gained almost 11%. But 2024 contains some key caveats that could test the “best six months” theory. Stocks have already registered a strong May to October period, with the S & P 500 climbing more than 15% from April 30 to Oct. 25, Stovall cautioned in a Monday note. In all of 2024 to date, the index has advanced more than 22%. This year’s market strength follows a standout 20% gain for the S & P 500 in 2023’s “best six months” period, he noted. “This double-dose of double-digit returns has caused investors to wonder if the market has used up its energy reserves and may be headed for tough times,” Stovall wrote. .SPX YTD mountain The S & P 500 has advanced more than 22% in 2024. Investors still have plenty of historical precedent to imagine stocks have further room to run. While not a guarantee, in the past, “prior momentum typically served as a running start to the following [November to April] period,” he added. Of the 10 times the S & P 500 has registered a gain of 10% or more from May to October, the benchmark still added roughly 13% from November to April and rose in price 92% of the time, Stovall noted. Stocks were higher on both Friday and Monday , with the S & P 500 trading within a hair’s breadth of this month’s all-time high of 5,864.67. Investors remain vigilant toward hundreds of corporate earnings reports this week, including five of the “Magnificent Seven” companies . On the economic front, Wall Street is monitoring the third GDP report Wednesday, the latest PCE price index, a measure the Fed focuses on to measure the cost of goods and services in the U.S. economy, on Thursday and the September nonfarm payrolls report on Friday.
The stock market’s best six-month period starts this week, especially for small caps
Oct 28, 2024
