What to Expect From the S&P 500 This Season

Plus, a list of the best and worst stocks to own from November through April

Senior Quantitative Analyst
Oct 27, 2021 at 8:00 AM
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Stocks have performed exceptionally well recently. With the S&P 500 Index (SPX) up 22% year-to-date, you might be wondering whether a pullback, or at least a pause, is in order. That scenario does not seem likely, however, according to the seasonality trend. Historically, November through April is the most bullish six-month period for the SPX.

More Bullishness Lies Ahead

The table below summarizes SPX returns over each six-month period going back 50 years. The index has averaged a 6.9% return over the next six months, with 76% of the returns positive. Both of those metrics rank first among all periods.

IOTW 1026 1

The following chart shows the path of the index during two periods. The next six months typically see a steady uptrend, while the May through October period chops around the 2% level after the first two and a half months.

IOTW 1026 2

What If We Are Already Up Big?

While the May through October period averages a gain of just 1.99% over the past 50 years, the current period is up over 9%. I thought this could be telling us to lower expectations over the subsequent six-month period, but that is not the case. According to the table below, when the prior six-month period adds 5% or more, the next November through April period does even better than usual. Specifically, it averages a gain of 10.8%, with 88% of the returns positive. 

IOTW 1026 3

Best and Worst Stocks

The last two tables show the best and worst SPX stocks from November through April since 2010. There are nine stocks that have been 100% positive in each of the 12 November through April periods since then. Plus, only two stocks averaged a loss during the time frame: Lumen Technologies (LUMN) and PPL (PPL).

IOTW 1026 4

IOTW 1026 5

 

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