November Almanac: “Best Months” Begin & Top Month in Election Years By: Jeffrey A. Hirsch & Christopher Mistal | October 24, 2024 | Email | Print

November begins the “Best Six Months” for the DJIA and S&P 500, and the “Best Eight Months” for NASDAQ. Small caps come into favor during November, but don’t really take off until the last two weeks of the year. November is the number-two DJIA and NASDAQ (since 1971) month. November is best for S&P 500 (since 1950), Russell 1000 (since 1979), and Russell 2000 (since 1979). Average performance in all year ranges from 1.8% from DJIA and S&P 500 to a solid 2.5% by Russell 2000.

 

November maintains its status among the top performing months as fourth-quarter cash inflows from institutions drive November to lead the best consecutive three-month span November-January. However, the month has taken hits during bear markets and November 2000, down –22.9% (undecided election and a nascent bear), was NASDAQ’s second worst month on record—only October 1987 was worse.

 

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.

 

 

Looking back at the last eighteen presidential elections since 1952, the day before Election Day has a clear bullish bias. DJIA and S&P 500 have declined just three times and average gains of 0.57% and 0.48% respectively. NASDAQ and Russell 2000 are slightly weaker, but still bullish. Election Day (or the day after prior to 1980) leans bullish, but with a greater frequency of losses. Incumbent party victories are shaded in light grey and appear to have little to no impact on trading the day before or on/after Election Day. The end of election uncertainty is what appears to lift traders’ and investors’ spirits.

 

 

Monthly options expiration often coincides with the week before Thanksgiving, but not in 2024. DJIA posted ten straight gains 1993-2002 and has been up 20 of the last 31 weeks before Thanksgiving but has been down the six of the last seven. The Monday of expiration week has been streaky, but the net result since 1994 is 18 DJIA gains in 30 years with 13 advances occurring in the last 20 years. Options expiration day has a bullish bias, DJIA up 16 of the last 22, but four of the declines have come in the last eight years. The week after expiration has been a mixed bag recently. DJIA has been up seven of the last eleven after being down five of six from 2006 to 2011.

 

 

Being a bullish month, November has eight bullish days based upon S&P 500, with four occurring in the first five trading days of the month. Although historically a bullish month, November does have weak points. NASDAQ and Russell 2000 exhibit the greatest strength at the beginning and end of November. Russell 2000 is notably bearish on the 12th trading day of the month; the small-cap benchmark has risen just ten times in the last 40 years (since 1984). The Russell 2000’s average decline is 0.42% on the day. Recent weakness around Thanksgiving has shifted DJIA and S&P 500 strength to mirror that of NASDAQ and Russell 2000 with the majority of bullish days at the beginning and end of the month. The best way to trade Thanksgiving is to go long into weakness the week before the holiday and exit into strength just before or after.