by Gary Alexander

November 1, 2022

“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.”

— from “The Tragedy of Pudd’n’head Wilson” (1894) by Mark Twain.

Today marks the starting bell for the best six months of the calendar year, especially in mid-term election years. To borrow from last week’s column, bear markets often die during October. About a dozen post-World War II bear markets bottomed out during October, starting in 1946. The most recent bear market low may have come mid-morning on October 13, 2022. Some of the other October market bottoms have been:

Bear market low The depth and length of the decline
October 22, 1957 The end of a 19.4% (564-day) bear market
October 25, 1960 The end of a 17.4% (294-day) bear market
October 27, 1962 * The end of the sudden Cuban Missile Crisis
October 7, 1966 The end of a 35.9% (539-day) bear market
October 3, 1974 The end of a 45.1% (630-day) bear market
October 19, 1987 The end of a 36.1% (55-day) bear market
October 11, 1990 The end of a 21.2% (86-day) bear market
October 8, 1998 The end of a 19.1% (83-day) bear market
October 10, 2002 The end of a 31.5% (204-day) bear market
October 13, 2022 ** The end of a 27.4% (283-day) bear market
*7 of these 10 examples (in bold) came in mid-term election years
** The hypothetical end of the 2022 bear market came on October 13, if that low holds.
Data source: The Almanac Investor; and Stock Trader’s Almanac

Was October 13 the low this year? So far, most major market indexes are up by double digits from the intra-day low set on October 13, 2022, so that may or may not be the bottom of the current slide, but the month of October certainly lived up to its recent reputation for stellar performance in the major indexes:

Market index October 2022 Since the October 13 Intra-day Low
Dow Jones +13.95% +14.21%
Russell 2000 +10.94% +12.48%
S&P 500  +8.80% +11.73%
NASDAQ  +4.98% +10.05%
Data source: Yahoo Finance

This scenario is right in line with what I have been predicting, based on historical patterns, since last May. When the market was bottoming out last June, I again said the eventual bottom was more likely to come in October than June, although May/June had provided bottoms in two or three mid-term election years.

November 1 Also Marks the Best Day to Buy

You may have heard the maxim, “Sell in May and Go Away.” We don’t agree with selling stocks in May, but the maxim is based on the fact that since 1950, the best six months for the S&P 500 have been from November 1 to April 30, with May 1 to October 31 being sub-par. What’s more, November begins the best three months (November 1 through January 31), so today is the day that screams, “Buy stocks now.”

Put in weather terms, the market tends to be HOT in the colder months, and cold in the hotter months.

Like most retrofit formulas, this one worked far better in the distant past than recently, but from 1990 to 2020, according to Investopedia, the S&P 500 has averaged just 2% annually from May to October vs. about 7% from November to April. My own hand-made charting (since 1998) shows an average of 1.5% gains from May to October and +5.9% from November to April. Here’s the record of the last 25 years.

Year April 30 October 31
1998 +21.6%  -2.3%
1999 +23.0%  +2.1%
2000 +6.6%  -1.6%
2001  -13.6% -15.2%
2002 +1.6% -17.8%
2003 +3.5% +14.6%
2004 +5.4%  +2.1%
2005 +2.4%  +4.3%
2006 +8.6%  +5.1%
2007 +7.6%  +4.5%
2008 -10.6% -35.0%
2009  -9.9% +18.7%
2010 +14.5%  -0.3%
2011 +15.2% -8.1%
2012 +11.5% +1.0%
2013 +13.1% +9.9%
2014 +7.3% +7.1%
2015 +3.3%  -0.3%
2016  -0.7%  +2.9%
2017 +12.1% +8.0%
2018 +2.8% +2.4%
2019 +8.6%  +3.1%
2020  -4.1% +12.3%
2021 +27.9% +10.1%
2022 -10.3% -6.3%
Average +5.9% +0.85%
Data Source: Yahoo Finance

That’s a lot of numbers, but look for the special path in mid-term election years. From November 1 (just before the mid-term election) to October 31 the next year, the average gain in the last six cycles is +13%.

When combined with mid-term election years, this November to April trend becomes even stronger. The mid-term election year is the worst year of the four – as this year has shown us – but the third year (next year) is the best, and the electoral celebration usually begins before mid-term election day (chart, below).

Average Returns Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Not convinced yet? Consider this. Since 1950, there have been 18 mid-term elections, and stocks have gone up the following 12 months every time. Just looking at the third year of the four-year presidential cycle, 16 were up, with one flat year and one small loss, averaging +16.6% gains. Not bad.

Third-year Presidential Cycle S&P Gains Third-year Presidential Cycle S&P Gains
1951 +16.5% 1987 (yes, it went up!)  +2.0%
1955 +26.4% 1991 +22.6%
1959 +8.8% 1995 +34.1%
1963 +18.9% 1999 +19.5%
1967 +20.1% 2003 +26.4%
1971 +10.8% 2007 +3.5%
1975 +31.5% 2011* No change
1979 +12.3% 2015**  -0.7%
1983 +17.3% 2019 +28.9%
Average third year of last 18 Election Cycles: +16.6%
Data Source: Stock Trader’s Almanac and Yahoo Finance
*If measured from November 1, 2010, to October 31, 2011, the 12-month S&P 500 gain was +5.9%
**If measured from November 1, 2014, to October 31, 2015, the 12-month S&P 500 gain was +3.0%

Shorter-term, November itself has a strong historical record, #2 (to April), measured 1975 to 2020:

November Record Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Recently (right, above), November has seen a long series of winning streaks, interrupted by a downdraft. Each November was up from 1995 to 1999, then it fell in 2000 (during the Bush vs. Gore presidential kerfuffle over “hanging chads”). Then, each November from 2001 to 2006 was strong before the 2007-09 Great Financial Crisis, with a slow recovery. November then enjoyed a nine-year winning streak, 2012 to 2020, before suffering a losing 2021. We could be ready to start a new November winning streak in 2022.

Burying the Corpse of Fascism (and Other “Virulent Isms”)

After we solve the stock market’s riddles, let us pause to recall that fascism was born 100 years ago this week. On Tuesday, October 31, 1922, after his March on Rome the previous weekend, Benito Mussolini was appointed Prime Minister of Italy by King Victor Emmanuel II, becoming the youngest man to bear that title to that date. Mussolini named has clan Fascisti after the Italian fascismo, derived from fascio, meaning “a bundle of sticks,” implying that we work better if we unite (and don’t think for ourselves). *

Almost exactly five years earlier, Vladimir Lenin, Leon Trotsky, and their comrades took over Russia in the Bolshevik Revolution, dubbed the October Revolution due to Russia’s Old Style Julian Calendar date of October 25, 1917, but the rest of the world knew that date as November 7 (in the New Style/Gregorian Calendar), so it’s no wonder that late October has a terrible reputation, amplified by Wall Street in 1929.

Between those two revolutions, in 1919, a successful engineer, entrepreneur, and peace activist named Herbert Hoover established a think tank on his alma mater, Stanford, called “The Hoover Institution on War, Revolution and Peace,” beginning as a library a decade before its namesake became U.S. President.

When I first visited the Hoover Institution in 1969, those in charge nicknamed it the “Institute for the study of the virulent isms” (mainly communism and fascism). That phrase stuck with me – these “isms” act like viruses, infecting the minds of the masses. Over the years, I’ve read most books by their most outstanding economic scholars, namely Milton Friedman and Thomas Sowell, as well as their current star historians, Niall Ferguson and Victor Davis Hanson. (Former U.S. Secretary of State Condoleezza Rice became director in 2020.) It still ranks as one of the top 10 most influential think tanks in the world.

We can all hope that communism died with the crumbling of the Berlin Wall in 1989 or the Kremlin hard-liners in 1991, but I’ve always thought it’s a mistake to divide totalitarianism between right (fascist) and left (communism). They’re both the same, a will to control others, and they are a constant threat to us all.

So, the first order of business is to give thanks for freedom, and the slow death of the most virulent isms.

*Being a jazz DJ for over 20 years now, let me add that October 31, 1922 also marks the birth date of three jazz saxophonists – Illinois Jacquet, famous for his tenor sax solo on “Flying Home” for Lionel Hampton in 1942, Ted Nash, famous for his alto sax solo on “Peter Gunn” for Henry Mancini in 1958, and King Norodom Sihanouk of Cambodia, famous not only for playing sax and loving jazz, but also for defying the CIA (see his 1973 book, “My War with the CIA”). Even Benito Mussolini gave us a musical son, Romano, who became a jazz pianist after the war. Actress Barbara Bell Geddes (film, Vertigo, and TV series, Dallas, was also born on Halloween Day of 1922.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
Bonds Still Hold the Keys to the Rebound

Sector Spotlight by Jason Bodner
How Do We Value Beaten-Down Stocks?

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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