Is This the Month Investors Should be Thankful For?

Thanksgiving.

Black Friday.

Cyber Monday.

Singles Day.

National Clean Out Your Fridge Day.

Fibonacci Day.

“November Rain” by Guns & Roses – the longest song in history to enter the Billboard Top 10.

There’s a laundry list of reasons to shower November with love. I mean, I could probably spend the entire 18-minute uncut version of “November Rain” bullet-pointing them.

Though, as investors, what we really care about is one thing… green.

Fortunately, November’s a gem that shines brighter than citrine or topaz. So, tune out those perma-bears, ignore the naysayers and the nagging negativity that’s constantly on the hunt to undermine your returns.

November is here… and that means it’s time to prepare for gains!

There’s Little Rain in November

It’s been a slog recently.

The major indexes have ended lower for three consecutive months: August, September and October. Two of those were to be expected. But October’s mid-month collapse was one somewhat outside the norm.

In fact, the 2.14% decline for the Invesco QQQ ETF (QQQ) – the proxy for the Nasdaq 100 – last month was its first in October since 2020. We had anticipated 65% chance for a gain. As I said, it wasn’t a sure thing. But better than average.

Well, November is now here.

Equities are already off to a fantastic start with tech stocks up nearly 5%... and we’re only seven days into the month.

But look at the long-term trend of the QQQ in November…

Over the past 20 years, the Nasdaq 100 has only closed November with a loss six times. That’s a 70% success rate.

Though, we’ve only experienced one loss in the month in the last 11 years!

And that was in 2018 in the midst of a harrowing collapse over the U.S.-China trade war.

So, this has historically been one of the most consistent months for the markets to rally.

And the reasons are 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 typically a very strong month for stocks. And you never buy into the gloom-and-doom so many are eager to peddle about the month.

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

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

Remember, when we talk about market trends it isn’t reading tea leaves. It’s based on probabilities, fundamentals, behavioral economics and investor psychology.

This is how we build accurate insights into what to expect in the weeks ahead. And why we can feel confident in November’s already hot start.

“There’s Always Next Season”

It’s Week 10 in the NFL season.

And even though there are several games left to play, plenty of teams are in rebuilding mode for 2024. Their seasons are effectively over.

Well, this is also a period where 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…. like September… like August… and February.

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

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

It’s a very, “You’ll 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.

So, November’s rally is real. And with the Federal Reserve taking a step back on rate hikes (possibly cutting in 2024) and crude oil tumbling in price, there’s likely plenty of pasture for this bull to run. So, there’s no need to put our mucking boots on. It’s time to grab those jogging shoes and prepare to run with the bulls!

Cheering the bull on,

Matthew

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© 2023 Matthew Carr

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This market commentary is opinion and for entertainment purposes only. The views and insights shared by the author are based on his many years of experience covering the markets. But they are subject to change without notice and opinions may become outdated. And there is no obligation by the author to update any information if these opinions become outdated. The information provided is obtained from sources believed to be reliable. But the author cannot guarantee its accuracy. Nothing in this email should be considered personalized investment advice. Investments should be made after consulting your financial advisor and after reviewing the financial statements of the company or companies in question.