The Dow Is Set to Make History Today

More often than not, the DJIA's win streaks don't continue to a Month 8

Andrea Kramer
Oct 31, 2017 at 12:35 PM
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The Dow Jones Industrial Average (DJIA) is set to end October with a healthy 4.3% gain, which would mark the index's best month since gaining 4.8% in February. What's more, while it will be the Dow's seventh straight monthly gain -- a feat not accomplished in over five years -- the DJIA is pacing for the smallest return during a seven-month rally ever. Below, we take a look at previous monthly win streaks for the blue-chip index, and what that could mean for stocks going forward.

The last seven-month rally for the Dow wrapped up in April 2012. Prior to that, you'd have to go back more than 10 years, to early 2007, for a similar stretch. In fact, this will be just the third seven-month winning streak for the index since the turn of the millennium, and between 1983 and 2007, there was just one other such streak -- in June 1995, according to Schaeffer's Senior Quantitative Analyst Rocky White. 

As alluded to earlier, the Dow is pacing for a 13% gain, which would mark the smallest return during a seven-month rally on record. The biggest rally during the course of seven straight months higher was in December 1915, when the index surged 52.52%. The longest Dow rallies occurred in the mid-1930s and late 1950s, with eventual streaks of 12 months apiece.

Dow 7-month win streaks

More often than not, these win streaks stop after the seventh month, with the DJIA averaging a one-month loss of 0.69%, and ending Month 8 higher just 46.7% of the time. For comparison, the Dow has averaged a one-month anytime gain of 0.55%, going back to 1900, with a win rate of 58.4%.

However, three months after these win streaks, the Dow has outperformed. The index was up 3.13%, on average, and was higher 73.3% of the time. That's roughly double the DJIA's average three-month gain of 1.71%, with a win rate of just 61.2%. So, if past is prologue, the Dow could take a breather in the historically positive month of November, but resume its rally into 2018.

Six months after a seven-month win streak, the Dow was 3.92% higher, on average -- exceeding its average six-month gain of 3.46%. However, a year after these streaks, the Dow's average gain of 6.76% is lower than its anytime average one-year gain of 7.2%, and the win rate of 60% is smaller than its anytime win rate of 65.5%.

dow returns after 7month win streaks

 

For stocks that could excel in November, if past is prologue, check out these 25 outperformers. And for stocks you may want to avoid, read The Worst Stocks and Sectors for November.

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