November a Bit Bullish

27Oct11

The end of October is nigh. This is a quick look at how the U.S. market has performed historically in November.

First, the numbers…

From this 30,000 foot view, November has performed in line with the average month over the last 81 years.

But averages can be misleading because they say nothing about how consistent an observation has been or whether it’s waxing or waning, so below I’ve assumed a trader was only long the S&P 500 in November (red) versus the average month (grey) each year since 1930.

[logarithmically-scaled, growth of $10,000]

The graph shows November was consistently weak until the late 1940’s, but since then has outperformed the average calendar month.

To make this clearer, below I’ve rerun the same test, this time beginning in 1949.

[logarithmically-scaled, growth of $10,000]

Note outperformance (23% versus 11% annualized return).

How consistent has the post-1949 outperformance been?

In the graph below I’ve shown the rolling 10-year average excess monthly return in November versus the average month.

Note abysmal performance prior to 1949 but fairly consistent outperformance since.

Like all seasonality plays this one has by no means been a sure thing and doesn’t by itself justify a trade, but I’m calling the calendar month bias for November as (a bit) BULLISH.

See the monthly seasonality map for daily seasonality predictions in November.

Happy Trading,
ms

Geek note: returns are dividend-adjusted. Dividends interpolated from quarterly data before 1988. S&P 500 TR index used 1988 and beyond.

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Filed under: Time-based   |  3 Comments