The Little Book of Stock Market Cycles: How to Take Advantage of Time-Proven Market Patterns

Chapter Nine

Winter of Content

An Infusion of Cash and Good Tidings Blossoms into Healthy Market Gains

November, December, and January are the best three consecutive months of the year. Not only do the odds favor solid gains, the gains themselves can be staggering compared to all other months. If you were only to be invested for three months of any year, these are the months. Dow and S&P 500 have averaged a 4.3 percent gain since 1950 from November to January, while NASDAQ and the Russell 2000 rack up 6.4 percent.

Conversely, when this three-month span fails to deliver gains as it did in 2007 and 2008, it is a red-flag warning that is best heeded. The late market analyst Edson Gould said it best, “If the market does not rally, as it should during bullish seasonal periods, it is a sign that other forces are stronger and that when the seasonal period ends those forces will really have their say.”

Navigating November

Ah, November, the holiday season begins and ushers in the start of the best months of the year. November ranks third or fourth depending on the time frame or index. It is the beginning of the Best Six Months for the Dow and S&P, and the Best Eight Months for NASDAQ. Small caps come into favor during November but they really take off the last two weeks of the year in December.

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. The month has taken hits ...