As we mentioned at the beginning of last month, October tends to be pretty volatile in the stock market. Measuring the standard deviation of the daily change in the Dow, October has historically been 40 percent more volatile than the other 11 months. And October did turn out to be pretty blah for investors. So maybe we should be glad that we turned the page on the calendar over the weekend.
So what can we expect from November? It's historically been a very good motnh, for a couple of reasons. Many financial institutions mark the end of their fiscal year on October 31, leading many money managers to take a fresh look at the markets starting on November 1 and start buying again. And November has now become the unofficial start of the Christmas season, making it a strong time of year for consumer spending and leading many retailers to post positive numbers.
Add it all together, and November is, historically speaking, the best month of the year for the S&P 500. On average it's gained 1.7 percent in November dating back to 1950. Actually, it's tied with December, which also averages a 1.7 percent gain; if you add up the next three months, November through January, they have historically accounted for more than half of all gains on the stock market. Let's hope we have another season of good cheer ahead of us.
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