by Jason Bodner

November 2, 2021

It’s hard to believe that November is here already. It is my birth month, and it is the 11th month of our Gregorian Calendar, but it’s actually the ninth month of the Roman Calendar. That’s why it’s called “November,” as the Roman name translates appropriately to “ninth month” (novum = nine in Latin).

But what will November bring for stocks – especially this November?

We’re coming off what feels to many like the strongest October for stocks in recent memory. And what an October it was… The four major indexes rose an average of just over 6%, according to FactSet

That said, the first instinct might be to think: With such a strong October, maybe we shouldn’t expect much for the rest of the year. And with all the daily negative news, it’s easy to agree with that notion.

First, let’s see how October 2021 compared to the 30 previous Octobers. October posted an average +1.3% performance, averaging the four main indexes since 1990. This October was stronger than average, but there were other years that did even better. I pointed some out here (data from FactSet):

So, 2021 was the best October since 2015, but both 2011 and 2015 performed better in all four indexes.

If we isolate these eight strongest Octobers (with arrows), we see 2021 is bang in the middle of the pack:

The good news is that November is a seasonally strong time of year. In fact, since 1990, it’s the strongest month of the year on average for all four stock market indexes – and for the Big Money Index (BMI):

Looking forward to December, that’s a strong month too, so here’s a table of how the successive Novembers and December performed following those seven previously strong October performances.

It looks like history is on our side. This track record may help passive investors have a little peace of mind, or those who just hold index tracking ETFs to breathe a sigh of relief.

While there are no guarantees in life, it looks like we can relax a little bit in the holiday season. Maybe it’s best to stress about how to find good gifts with this supply shortage strangling retail right now.

But active investors will try to beat the markets, so what does this setup mean for traders and timers?

In the end, active investing comes down to investment selection. For long stock investors, it can be a fun but frustrating game, but I believe in the power of outlier stocks. That’s due in part to Professor Hendrick Bessembinder’s research, reflected in his paper: Do Stocks Outperform Treasury Bills? In it, he proved that only 4% of stocks accounted for all of the stock gains above Treasuries since 1926 and 1% of stocks accounted for half of those gains. That means, if you’re good at stock picking, you can beat the market.

But the market can be a cruel mistress. Patience is a great quality when dealing with the moods and whims of a market made of millions of emotional beings. Investors may be real humans or humans who programmed the machines that are so pervasive, but either way, sometimes you’re up and sometimes you’re down, and no one likes to be down. As with any investment process, when you’re down long enough, you start to question if it works anymore. That’s when patience and mental fortitude come in.

Here’s a great example from my pursuit of outlier stocks during 2021. In February, I went to the portal at MAPsignals.com. I used the Portfolio Creator to find the most frequently occurring outliers from the six months prior to February 2021. (I chose February because the market peaked then, at mid-month. Growth stocks then went on sale in what would become a choppy few months thereafter. Buying a model portfolio of the 20 strongest growth outliers served well for just barely two weeks Then it was not fun.)

We see the results in the chart below. From February to May, my custom basket of potential outlier stocks lagged the S&P 500 tracking ETF, SPY, by a factor of three. Yuck.

Things seemed bleak and a doubter might think that maybe holding outliers was no longer such a good idea. But that would have been the worst moment to abandon a time-tested process. The slow climb back began for this high-growth portfolio on May 12. As they say: elevator down, stairs up, but be patient…

The portfolio rose to eventually catch up and then eclipse the market:

All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.

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About The Author

Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT

Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner

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Jason Bodner is a co-founder and co-owner of Mapsignals. Mr. Bodner is an independent contractor who is occasionally hired by Navellier & Associates to write an article and or provide opinions for possible use in articles that appear in Navellier & Associates weekly Market Mail. Mr. Bodner is not employed or affiliated with Louis Navellier, Navellier & Associates, Inc., or any other Navellier owned entity. The opinions and statements made here are those of Mr. Bodner and not necessarily those of any other persons or entities. This is not an endorsement, or solicitation or testimonial or investment advice regarding the BMI Index or any statements or recommendations or analysis in the article or the BMI Index or Mapsignals or its products or strategies.

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