The Bull Thread

The Bull's Biggest Hits and Misses
Mon, Oct 14, 2024

The bull market turned two years old over the weekend, so we wanted to take a quick moment to highlight some of the S&P 500's biggest winners and losers over the last two years. Since the S&P 500's closing low two years ago, 73 stocks in the S&P 500 have rallied at least 100% while just 71 are down. The table below lists the 19 stocks that have rallied at least 200%, and below that we list the 24 stocks that have declined at least 25%.

AI has been a leading theme of the bull market, so most people already know that NVIDIA (NVDA) -- with its ten-bagger -- tops the list in terms of performance. Even the big gains in Super Micro (SMCI) and Vistra (VST) probably won't surprise many people, but looking through the list, some names will likely be eye-openers. Take General Electric (GE). Wasn't that an also-ran from the 1990s? After two decades in a 'penance' working off the financial engineering before 2000 and some questionable leadership and strategic decisions, GE has gotten a new lease after breaking up into three units. Its aerospace unit, which trades under the old ticker GE, has rallied more than 350% during this bull market, and even the two other spin-offs, GE Vernova (GEV), which consists of its electric power business, has doubled, while GE Healthcare (GEHC) is up 50%. Besides GE, other names that may come as a surprise to investors are Royal Caribbean (RCL), Axon Enterprises (AXON), Howmet Aerospace (HWM), and KKR. At the sector level, Technology leads the list with seven of the 19 names listed while Consumer Staples, Energy, Materials, Health Care, and Real Estate aren't represented at all.



Of the 24 stocks that have declined at least 25%, seven come from the Consumer Staples sector, including Walgreens Boots Alliance (WBA) and Dollar General (DG), which are both down over 60%. Health Care is the second most represented sector with six stocks, while Materials is the only other one with more than two stocks on the list. Overall, eight sectors are represented, with Consumer Discretionary, Financials, and Real Estate being the only ones missing.

Moderna (MRNA) and Pfizer (PFE) were two of the biggest winners during Covid as investors couldn't get enough of the stocks given their exposure to the vaccine. Now that Covid is well in the rearview mirror and jabs of the treatment have slowed to a trickle relative to the rates of 2021, investors want little to do with these former market darlings.

The lists of winners and losers during this bull market illustrate the importance of first-mover advantages. In the table above, streaming pioneer Netflix (NFLX) ranked 15th in performance with a gain of 227%. Contrast that to names like Paramount Global (PARA) and Warner Brothers Discovery (WBD) below. In 2021, these companies and others were convinced by NFLX's streaming success that launching their own services would be a breeze. However, as the years have passed, the competitive nature of the streaming market has become apparent. There's a limit to how many services consumers are willing or able to pay for.

 

October Monthly Option Expiration Week: S&P 500 Up 14 of the last 16



Since 1994, October’s expiration day tends to be mixed with modest average losses across the board even though S&P 500 and NASDAQ have advanced more often than not. Expiration week and the week after have been bullish led by solid average gains from DJIA and S&P 500. DJIA and S&P 500 have the best long-term records. October’s reputation for volatility can be seen with wild daily and weekly swings in the tables below. Weekly moves in excess of 4% appear throughout the tables below. However, not all of those big weeks were losers especially during the following week.

 

Election Update Part 2: Potential Risks to the Outlook


We are now three weeks to election day, though about 4.7 million people have already voted. Most of those are mail-in ballot. About 55 million mail ballots have been requested (that’s 35% of the total votes cast in 2020), and 3.8 million have been returned so far.

In part 1 of this election update, I walked through where the odds stand for the presidential election, the Senate, and House. That was from a week ago, and things really haven’t changed much. It’s a very close race for the presidency, at least going by polls. In some ways, the US is bucking a global trend. Incumbents across the world who governed through the inflationary aftermath of the pandemic have taken bit of thumping at the polling booth, including in Britain, France, South Korea, Brazil, India, and even South Africa. The counter here in the US is that the economy has outperformed other developed economies and even pre-pandemic projections. At the same time, there’s a lot of uncertainty in the polls. Even a narrow polling error could see Vice President Harris win in a landslide, or former President Trump winning with a margin that exceeds his narrow victory in 2016.

Control of Congress is especially important this time around. That’s because we have a massive fiscal event, or cliff, at the end of next year. If Congress does nothing, a lot of elements of the 2017 Tax Cut and Jobs Act (TCJA, which was signed into law by former President Trump) will expire on December 31, 2025. Most expiring provisions are on the individual side, but there’s some risk on the business side as well. Washington DC in 2025 is likely to be dominated by tax policy related negotiations, which will get ever more feverish as the deadline approaches.

What Could Upset the Apple Cart? Higher Taxes and Tariffs
To be clear, by “apple cart,” I mean the stock market and the economy (and both are looking pretty good).

Right now, the race for the House is tight, while Republicans are favored in the Senate. Odds slightly favor split party control of Washington D.C. next year, a situation that has historically been positive for markets (Presidents can’t “go big” on policy changes in one direction or the other). However, the odds of a Blue Wave or a Red Wave are not insignificant. So, it’s worth looking at the biggest risks associated with either a Blue or a Red wave.

Blue wave: The main risk of a Democratic sweep is higher corporate taxes. Harris’ plans include raising the corporate tax rate from 21% to 28%. That would not be as high as it was pre-2017 (35%), but it would still be a drag for equities. However, even if we have a 2022-sized polling error in favor of Democrats, the Senate will likely be close. There’s likely to be at least 1-2 centrist-leaning senators within the Democratic party who are unlikely to agree to a corporate tax hike, so I think the odds of a corporate tax hike even with a blue wave are quite low.

Red wave: The main risk of a Republican sweep is around tariffs. Tariff policy does not necessarily involve Congress. Presidents can impose tariffs without bringing Congress into the matter, as former President Trump did in his first term. This matters because President Trump has ratcheted up the rhetoric on tariffs. He recently said he’d impose a 200% tariff on vehicles imported from Mexico (which would drive up prices immediately). He could be emboldened by a red wave, taking it as tacit approval for his tariff proposals. By itself, this would not be a great scenario for markets. Looking back, the trade war of 2018-2019 created a lot of volatility. The S&P 500 eventually recovered from a 4% drop in 2018, mostly thanks to the Fed pulling back rates in 2019. However, if inflation surges because of tariffs, the Fed may put interest rate normalization on hold, creating an additional headwind for the economy and markets.

Investment spending, which is what you need for productivity growth, also lagged across 2018-2019, reversing gains made initially in anticipation of corporate tax cuts. The chart below shows new orders for nondefense capital goods (a proxy for business investment) from 2017 through February 2020 (pre-pandemic). The TCJA was strong supply-side policy implementation that encouraged investment, but its impact was considerably dulled by the Trump administration’s trade policy.



Deficit Spending, as Far as the Eye Can See
Both Harris and Trump have put out various tax proposals. We can’t really know what will be implemented. In addition to not knowing who will be in the White House and the make-up of Congress, we don’t know how much of this is just campaign rhetoric. But the big picture is this: deficits are likely to increase.

We think Congress is unlikely to simply do nothing and let all tax cuts expire. This “fiscal cliff” is certainly a risk, especially if we get split party control and the different sides can’t reach a deal, but both sides would likely consider such an approach an unforced policy error, not to mention a midterm election error. Think of what higher taxes across the board will do to household spending in early 2026. However, this is highly unlikely, especially with upcoming midterm elections in 2026 clarifying the sense of purpose (and ambitions) in Congress.

By itself, extending every single expiring provision of the TCJA will increase the federal budget deficit by $5.2 trillion over the next 10 years (2026-2035). With that baseline, let’s look at the impact of the two candidate’s plans, as analyzed by the bipartisan Committee for a Responsible Federal Budget (CRFB).

Harris’ plans would add about $3.5 trillion to the deficit, with estimates of $0 at the low end, and $8.1 trillion at the high end. Trumps’ plans would add $7.5 trillion to the deficit, with $1.5 trillion at the low end, and $15.2 trillion at the high end. The table below is from the CRFB and shows the median estimates for both candidates. None of it is likely to come to pass exactly as you see below, but these will form the outlines of any negotiation. And irrespective of who’s President, or who controls Congress, the path of least resistance is more spending, and higher deficits (I wrote about this way back in March).



Taken from: https://www.crfb.org/papers/fiscal-impact-harris-and-trump-campaign-plans

Rising Deficits During Economic Expansions Is Rare
The Federal government’s “primary balance” is revenue minus spending excluding interest payments on Treasury debt. It is one way to measure how much net spending is happening at the Federal level. The chart below shows the primary balance as a percent of GDP. As you can see, prior to the 2010s, the primary balance was always in positive territory as economic expansions wore on. It fell into deficit only during recessions, which isn’t surprising. That’s when economic stabilizers (like unemployment benefits) kick in. Revenue collection also drops during recessions, as there’s less income. In short, US fiscal policy has historically been counter-cyclical. The exception to this was the mid-to-late 2010s, when deficits rose even as the economy strengthened (especially after the TCJA was passed). But this new dynamic is likely to continue into the rest of this decade.



Markets May Like Deficit Spending, At Least Temporarily
Deficits can potentially boost corporate profits, assuming it doesn’t crowd out consumer spending or private sector investment — we wrote about this in our 2024 midyear outlook. That’s positive for markets, since profits are what matter. At the national aggregate level, corporate profits are the net result of saving and consumption by the four major sectors of the economy: households, businesses, government, and the rest of the world (via trade). Rising household savings and rising government savings (budget surpluses) drag from profits, and vice versa. More business investment and dividends paid out add to profits. A rising current account surplus means the rest of the world is buying more US-made goods and services than Americans buy from foreigners, and that increases business revenues and profits, whereas a current account deficit (which is typically what the US has) means Americans buy relatively more from abroad, and that’s a drag on profits. Note that this aggregate picture doesn’t tell us which companies are growing profits, or how it’s distributed across industries.

Profit growth surged over the 2016-2019 period on the back of higher fiscal deficits (post-TCJA). Even over the last six quarters, households have started saving more (relatively) but corporate profits rose because fiscal deficits started growing again.



All this to say, the risks of a higher corporate tax rate (Harris) or tariffs (Trump) could be countered by rising fiscal deficits, resulting in a net boost to profits. That’s potentially positive for markets.

The main concern with deficit-fueled growth is whether it leads to inflation. It doesn’t have to, like in 2018-2019, or even more recently over the past 18 months, when deficits rose but inflation eased. However, it’s quite likely that a US economy that is growing and near its productive capacity sees bouts of higher inflation as well. That could put a halt to the Fed’s easing cycle, and at worst, reverse it with the Fed raising interest rates once again. (Ironically, deficits worsen as rates rise because of higher interest costs for the government.)

Nothing is binary when it comes to investing, let alone for the economy. I’ve laid out several potential risks for markets and the economy, under either a Harris or Trump administration. That doesn’t mean these risks have a high chance of materializing. The most important thing to keep in mind is that U.S. companies are amongst the most dynamic in the world and can adapt to temporary headwinds, whether higher taxes or tariffs. That’s ultimately positive for long-term profit growth, which is what drives markets for the most part. What we really don’t want to see is a recession, but that’s far from our base case right now.

 

Why There Could Be Years Left to This Bull Market


“No man ever steps in the same river twice, for it’s not the same river and he’s not the same man.” — Heraclitus, ancient Greek philosopher

First things first, no one knows how much longer this bull market might last, but as we’ve been saying for a long time now, we see no reasons to expect the economy to sink into a recession, nor do we see any major warning signs the bull market is over. The good news is once bull markets make it past their second birthday, they tend to last multiple more years.

Here’s a table we shared in Happy Second Birthday to the Bull Market last week, but we wanted to take a closer look at how long recent bull markets have lasted. The 114% rally after the pandemic didn’t quite make it to two years, but looking back fifty years, every other bull market has had a lot more left in the tank after its second birthday. There were five bull markets over that time span that made it to the start of their third year, and the shortest one lasted was 5.0 years (which actually happened twice). I like to think of this like a cruise ship — once it gets moving it is hard to stop or slow down.



Here’s another look at things. I’ll say this, this table took me a long time to put together, but I like the way it turned out and I think we can learn a lot from it. The bottom line is year three of bull markets tend to be rather weak, up only 2.1% on average. I guess this shouldn’t be a huge surprise, as usually years one and two tend to see huge gains, so some type of choppy action or consolidation the third year would be normal.



Now take a look at how often bull markets made it to years four and five once they get to their third birthday. Should this bull market make it another year (as we expect), the returns in years four and five are extremely strong, up 14.6% in year four and nearly 19% in year five. That should have bulls smiling indeed.

Go read the quote above by Heraclitus again. I think it relates quite well to bull markets, as no two bull markets are ever the same. We like to look at the past to get a picture for what could happen in the future, but the truth is all bull markets are different. All we can do is look at the data as we get it and make an honest assessment of what could happen next. And not to beat a dead horse, but we simply see no reason to change the overweight we’ve held on stocks since December 2022, nor do we see enough cracks in the economy to call for a recession. So how much longer could this bull market last? Maybe many more years, which might surprise many, but history says it is possible.

 

New All-Time S&P 500 Highs – No Need to Fear Until They Cease



S&P 500 has recorded 46 new all-time closing highs as of the market’s close on October 16, 2024. All of these new all-times highs have accompanied a solid 22.5% S&P 500 gain thus far. Since 1950, S&P 500 has recorded 1370 new all-time closing highs in nearly 75 years, which averages out to 18.3 new all-time highs per year. This makes 2024 an above average year and there is still over two months of trading remaining.

In the table above, yearly S&P 500 performance has been split into three separate categories, Above Average (more than 18), Below Average (1 to 18), and No New Highs based on the frequency of new all-time highs logged in each year. Each category has the year, the number of new all-time highs, the year’s performance and the following year’s performance.

Years with an above average number of new all-time highs, outperformed by a wide margin. Only 2018 was negative. Average S&P 500 full-year gain was a solid 20.7%. Years with a below average number of new all-times, were mixed and produced the smallest average gain. Years with no new all-time highs were slightly better based upon an average gain of 3.0% and more advancing years, but also had frequent double-digit losses.

Looking at the Next Year % performance when S&P 500 stops hitting new all-time highs is where some concern begins to trickle in. S&P 500 performance in the Next Year after an Above Average Year has not been all that great. Average performance dives to just 5.9% and only 63% of the Next Years were positive. The next time you hear someone getting nervous about S&P 500 new all-time highs frequently occurring, their concern is not entirely unwarranted.

 

Trump's Odds Pass 60%
Tue, Oct 22, 2024

We are now only two weeks away from Election Day. As the day draws near, polls have flipped between marginally favoring one candidate or the other over the past few months. In other words, according to polling, the election outcome is a coinflip. Meanwhile, betting markets have seen some significant moves and are projecting more of a decisive outcome. We discussed how these have related to equities' performance in last week's Bespoke Report. Moving deeper on the odds themselves, below we show data from ElectionBettingOdds.com which now puts former President Trump at an over 60% chance of winning the November election. That is the highest odds for him since July 22nd following news that President Biden officially dropped out of the race and when Vice President Harris assumed the candidacy. Trump's gains have of course come at Harris' losses as her odds are down to 39%. With that being said, at those levels, Harris's odds remain stronger than the median reading for Biden during his time in the campaign. In fact, during the current election cycle up until dropping out, Biden only had stronger odds than Harris currently does from March through early June of this year.



As with any election, the past year has been eventful and in turn, there have been massive swings in betting markets' predictions of the November winner. Below, we show how the odds have changed since various events like the debates, Biden dropping out, and the first assassination attempt on Trump's life. While the event didn't perfectly line up with the latest peaks and troughs in odds, the time after the second debate has seen a particularly big swing. President Trump has seen his odds rise close to double digits since then. That hasn't been a full recovery from the peak in his odds when Biden dropped out, but it does make things unchanged since the first assassination attempt on July 13th.



In the chart below, we show each party's odds at 14 days out from the election for each of the past three cycles. As shown, 2016 and 2020 saw heavy favoritism for the Democrats at a comparable point in time. 2016 in particular was predicting a landslide with Democrats being given an 84% chance. 2020 was a closer race, but still favored Democrats with a 63% chance of winning. This time around, those odds are flipped with Republicans now favored. Additionally, this is still the tightest race of these years albeit only by a few percentage points (relative to 2020). As for where the odds might move to in the next couple of weeks, we would note that in 2016 and 2020, there were only a few points difference between the odds at 14 days out versus the day before Election Day.



For another comparison to those previous elections, below we show how Republican betting odds shaped up over the year before election day in 2016, 2020, and this year. As noted in the chart above, there are examples of odds being much more elevated in each of the prior elections with Democrats being given a better than 80% chance to win at the comparable time in 2016. However, for Republican odds, outside of this past summer, the only other time where Trump was given a 60%+ probability of winning was briefly in February 2020. Of course, like polling, betting market predictions are no sure thing. While the outcome predicted in 2020 was correct, results in 2016 were wildly off.

 

Octoberphobia Strikes Again! But Worst Months Still Good



Once again October is delivering on its infamous history with a scary, late-month selloff right in line with the seasonal trough (see Monday’s post). However, even at the lows so far today S&P 500 was only off 2% from the 10/18 high and DJIA is still up 12% for the Worst Six Months May-October (AKA Sell in May). This ranks in the Top 15 WSM since 1950. And when WSM is good the Best Six Months are solid.

There are a few weak BSM in this group but overall, the performance is pretty good with no losers and an average gain of 13.2%. We have a brand-new list of stock and ETF picks in our recommended newsletter portfolios at https://stocktradersalmanac.com/Index.aspx. To wit: Buy in October and get your portfolio sober!

 

Half a Year of Bulls
Thu, Oct 24, 2024

The S&P 500's modest turn lower in the past several days has coincided with a meaningful downturn in investor sentiment. According to the weekly sentiment survey run by the American Association of Individual Investors (AAII), only 37.7% of respondents reported as bullish this week compared to 45.5% last week and over 50% one month ago. At current levels, bullish sentiment is now at the lowest level in six months.



As could be expected, the drop in bullish sentiment has resulted in an uptick in bearish sentiment. Bears accounted for 29.9% of responses this week. That is up 9.3 percentage points in the past two weeks off of the recent low of 20.6%. While that is a decent sized increase, it only leaves the reading at the highest level in a little over a month.



Put together, there are still more investors reporting as bullish than bearish with the former outnumbering the latter by 7.8 percentage points.



As shown below, it has now been 26 consecutive weeks in which bulls have outnumbered bears. That is a historically long stretch of bullish sentiment. This current streak has now surpassed two 24-week long runs ending in July 2021 and April 2024 for the longest streak since 2015. Prior to that, there have only been seven other times in which sentiment has been net bullish for more than half a year.



The AAII survey is not the only gauge that continues to show bullish sentiment. When combined with the Investors Intelligence survey and NAAIM Exposure index into our Sentiment Composite, these three surveys all indicate investors remain firmly bullish with levels around 0.54 standard deviations above the historical average.



Not only has the AAII bull-bear spread been positive for half a year, but so too has our Sentiment Composite. For this index, there have only been three other streaks in which it has been positive for as long as the present. The first of these was a 33 week long run ending in mid-2015. The next longest and most recent prior streak lasted just under a year (50 weeks) coming to a close in September 2021. Then there was the record streak of 72 weeks in a row ending in March of 2018.

 

Halloween Trading Strategy Treat Begins Next Week

Next week provides a special short-term seasonal opportunity, one of the most consistent of the year. The last 4 trading days of October and the first 3 trading days of November have a stellar record the last 30 years. From the tables below:

DJIA: Up 24 of last 30 years, average gain 1.95%, median gain 1.39%.
S&P 500: Up 25 of last 30 years, average gain 1.96%, median gain 1.61%.
NASDAQ: Up 25 of last 30 years, average gain 2.43%, median gain 2.29%.
Russell 2000: Up 23 of last 30 years, average gain 2.34%, median gain 2.56%.

Many refer to our Best Six Months Tactical Seasonal Switching Strategy as the Halloween Indicator or Halloween Strategy and of course “Sell in May”. These catch phrases highlight our discovery that was first published in 1986 in the 1987 Stock Trader’s Almanac that most of the market’s gains have been made from October 31 to April 30, while the market, on average, tends to go sideways to down from May through October.

Since issuing our Seasonal MACD Buy signal for DJIA, S&P 500, NASDAQ, and Russell 2000, on October 11, 2024, we have been moving into new long trades targeting seasonal strength in various sectors of the market via ETFs and a basket of new stock ideas. The above 7-day span is one specific period of strength during the “Best Months.” Plenty of time remains to take advantage of seasonal strength.

 

Waiting to Exhale for the Transports
Mon, Oct 28, 2024

Tomorrow marks the 95th anniversary of Black Tuesday when the Dow fell over 12% in a single day as the US economy transitioned from the Roaring 20s to the Great Depression. The Dow closed at 230.07 on 10/29/1929, but today it’s trading 185 times higher. As we say so often, when it comes to the stock market, you can have no better friend than time.

The Dow most recently closed at a record high on 10/18, and in the ten days since then, it’s seen a modest pullback of less than 2%. The Dow Transports, however, has followed a much different path. While it is also close to its all-time high (less than 5%), as shown in the chart below, its record high was nearly three years ago on 11/2/21. Since the Transports last closed at a high, the Dow Industrials rallied nearly 18% and notched 53 record closing highs along the way. We hope there weren’t any Dow theorists out there holding their breath waiting for confirmation of the new highs in the Dow Industrials!



The fact that the Dow Industrials has had 53 record highs since the last closing high in the Transports is extremely uncommon. The chart below shows the number of closing highs in the Dow Industrials between closing highs in the Transports. In other words, it shows a rolling total of new highs in the Dow Industrials and resets each time the Dow Transports close at a record high.

Since the peak right before Black Tuesday in 1929, only two other periods saw more closing highs in the Dow Industrials between closing highs in the Transports. The highest number of highs occurred between the mid-1950s to mid-1960s. Back then, the Dow Industrials was the first to take out its 1929 high in late 1954, but it wasn’t for nearly 10 more years and 192 new highs in the Industrials that the Transports took out its high. After that, from the late summer of 1989 through early 1993, the Dow Industrials closed at 54 record closing highs between highs in the Transports. That means that unless the Transports rally 4.5% before the Industrials can gain 2%, the current period will at least tie the period of the early 1990s for the most closing highs in the Industrials between new highs in the Transports.

 

November Top Month in Election Years

November remains a top performing month in presidential election years. DJIA has advanced in 11 of the last 18 election years since 1952 with an average gain of 2.3%. Significant DJIA declines occurred in 2008 (-5.3%) and 2000 (-5.1%). For S&P 500 November ranks best with a similar record to DJIA. NASDAQ, Russell 1000 and Russell 2000 are not as strong ranking #7, #2 and #3 respectively. Fewer years of data (13 for NASDAQ and 11 for Russell indices) combined with sizable losses in 2000 and 2008 drag down rankings and average gains when compared to DJIA and S&P 500. In 2020, all five indices advanced by over 10% led by an 18.3% gain by Russell 2000.

 

Buy In October! Best Six Months Starts Now!

My retort to Sell in May… is “Buy in October and get your portfolio sober!”

Our Best Months Switching Strategy has been around since 1986 when Yale Hirsch first published it in the 1987 Stock Trader’s Almanac. Fast forward 38 years to 2024 and the six consecutive month span, November through April, is still the best for S&P 500 and DJIA since 1950. S&P 500 averages 7.1% and has advanced 77.0% of the time. DJIA has been even stronger, gaining 7.4%, up 78.4% of the time.



Over the years the strategy has been refined. Using the MACD (Moving Average Convergence Divergence) indicator to better time the entries and exits. DJIA’ average gain increases to 8.9% (up 85.1% of the time) while S&P 500 average increases to 8.5% (up 79.7% of the time). In some years MACD can delay the start of the Best Months, and in others like this year, the buy signal can arrive in October. We issued our Seasonal MACD Buy signal on the close on October 11, 2024.

For Almanac readers following our Best 6 + 4-Year Cycle strategy, the recent buy signal would not have mattered as they have been long since the market bottomed in mid-term year 2022. We first introduced this refinement to Yale’s original Best Months strategy to Almanac Investor members in the October 2006 issue. With only four trades in four years, since 1949, this strategy lifts DJIA average gain to 9.7% (up 86.8% of the holding periods).

All three approaches to trading the “Best Months” are covered in the 58th annual edition of the Stock Trader’s Almanac for 2025 as well as trading NASDAQ’s Best Eight Months.

 

Seven Reasons This Bull Market Is Alive and Well


“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” -Winston Churchill

Yes, stocks have had an incredible run this year (and last year), but there are some reasons to expect the good times to continue. No, we aren’t looking for another 20% next year, but better than average returns in 2025 is still quite possible.

Today I want to share some reasons to continue having a “glass half full” mentality as we head into the election and look ahead to 2025.

Up Six Weeks in a Row
Well, it was bound to happen eventually, but stocks finally fell last week, with the S&P down about 1.0%. Remember though, it has been higher the past six weeks for the longest weekly win streak this entire year, so some red on the screen is perfectly normal. The election is also right around the corner and some type of well-deserved jitters ahead of a potentially volatile event is also perfectly normal. And of course, stocks not going up every week is perfectly normal.

Still, the S&P 500 is up nearly 22% on the year. If the year ended right now that would be the best election year return since a 25% gain way back in 1980. Even if there were some election volatility, long weekly win streaks tend to happen in bull markets, which is another reason we would not panic should more near-term pain take place. Since 1950, we found there were 22 other times the S&P 500 had a six-week win streak (meaning stocks were lower the seventh week) and it was higher a year later 19 times and up a solid 12.6% on average. Yes, the returns over the next month were negative, but after long winning streaks this shouldn’t be very surprising.



The Best Six Months Are Here
We hear all the time about how the worst six months of the year are May through October, also known as the “Sell in May” time of year. We pushed back against this bearish narrative many times this year and all we’ve seen is stocks gain five months in a row during this usually bearish time of year.

Well, now we are entering the best six months of the year, where the S&P 500 has gained 7.1% on average and been higher 77.0% of the time. This indeed could have the bulls smiling.



But what happens when the ‘Sell in May’ period is strong? After all, this time around stocks have gained more than 15% during this usually weak six-month stretch, one of the best gains over this period ever. We found 11 other times stocks gained double digits from May through October and the next six months did even better, gaining 10 times and up 13.2% on average, well above the 7.1% average seen in all years.



The Best Three Months
Another reason to remain bullish is November, December, and January are historically the best consecutive three months of the year, up 4.4% on average.



November Is the Best Month of the Year
November is historically a very strong month for stocks. The last time it fell more than 1% was in 2008, and it has been higher 11 of the past 12 years. Not to be outdone, it is the best month since 1950, in the past decade, and in election years, while it ranks as the second-best month the past 20 years (only July is better).



Up Five Months in a Row
The S&P 500 might be up six months in a row soon, but October still has a few more days. But it is already officially up five months in a row. Historically, the year after a five-month win streak the S&P 500 has been higher 28 out of 29 times and up more than 10% on average. Whoa.



Up 10 of 11 Months Is Also Bullish
The fun doesn’t stop just yet, as when stocks gain ten of eleven months (like now) they are higher a year later nine out of ten times and up nearly 15% on average. In other words, this blast of strength we’ve seen isn’t a reason to turn bearish. In fact, it might be a reason to remain in the glass half full camp as we head into 2025.



This Isn’t an Old Bull Market
Data shows that once someone hits 65 years old, the odds of making it to 85 are quite high. It turns out bull markets are like this, as we found that once a bull makes it into its third year (like this one has) the potential for many more years of gains is actually quite high. Go take another look at the Churchill quote above, as I think it fits this bull market quite well. We might be past the beginning of the bull market, but by no means does that mean it is done.

Going back 50 years, we found there were five other bull markets that made it past their second birthday. Wouldn’t you know it, the worst any of them did was lasting another three years (which happened twice). Meanwhile, the average bull lasted eight years and gained 288% when all was said and done.

No one knows how long this bull will last, but the bottom line is history says be open to this bull market lasting much longer than probably most expect.

 

November, December & January: Best Rolling 3-Month Span

Since 1971 NASDAQ’s Best 3 Months November-January towers above, averaging 6.2%, higher 75.5% of the time. In election years, Nov-Jan has the highest plurality of gains at 76.9%, but the average gain of 4.5% is 2nd best to June-August.

November-January is the top 3-month period for DJIA and S&P 500 in all years and election years. In all years since 1950 DJIA is up 4.3% on average, up 71.6% of the time. S&P averages 4.4%, up 73.0% of the time. In election years, DJIA is up on average 4.3%, up 72.2% of the time while S&P is up on average 4.0%, up 72.2% of the time.