- Based on nearly 70 years’ worth of data, November 1 marks the start of the best six months for the stock market.
- Chad Shoop shares a chart that shows the S&P 500 Index’s strong performance from November to April.
- He offers you a great way to take advantage of the sectors that perform best during the months ahead.
I’m sure you’re hesitant to stay invested this time of the year — I don’t blame you.
After all, at this time last year, the market was on a decline.
It was the worst performance for the fourth quarter in the years since the Great Recession.
It burned a lot of investors.
It was even clear at our annual symposium on Amelia Island, Florida, in September. Many investors were nervous about the fourth quarter this year.
But as I told them back then: I’m excited about the next six months this year.
See, everyone worries because they put more emphasis on what’s happened recently versus what the historical pattern shows.
That’s recency bias — and if you fall prey to it, you’ll miss out on the huge opportunity coming in the months ahead.
November to April: The Best 6 Months of the Year
November 1 marks the start of the best six months of the year.
There is a strong historical trend that shows outperformance in the stock market.
That seasonal pattern is why November to April are the best six months of the year.
And you don’t want to miss out — regardless of what happened last year.
I understand if you’re worried. As I said earlier, many investors follow recency bias. But when I look at the data, I’m reassured that now is not the time to be fearful.
Watch my video below, and I’ll explain why you shouldn’t follow investors’ fears.
Today, I want to share it with you.
Take a look at the chart below. It highlights the strength of these six months:
This seasonal chart goes back to 1950 — that’s 69 years’ worth of analytical data.
This is a long-lasting phenomenon. You’ll notice the five highest-performing months of the year — the blue bars — fall within the six-month period.
October is one of the most volatile months, but it’s still a positive month.
And you’ll also notice that February is a weaker month, but it’s not worth skipping.
At the beginning of October, I wrote on Twitter that you don’t want the volatility to shake you out of the market.
With another 300 point drop in the Dow, $DJIA, October’s #volatility is back. Yes, October is a volatile month, but it’s also a positive one. Oct has average monthly return of 0.11% since 1928. Not great, but positive. Nov, Dec and Jan are best performers. Don’t miss the rally.
— Chad Shoop, CMT (@ChadShoopGuru) October 2, 2019
We are about to enter the best six months of the year — so this is the time you want to stay invested in the market.
Yes, May through October are historically weak. All the uncertainty and volatility can make you question whether to stay invested or sell.
But if it pays to be invested during a time period that severely underperforms the best six months of the year … I assure you the rewards that will come once that six-month period starts will be even greater.
Biotech Sector Will Outperform the S&P 500 Index
You can benefit from the November through April rally by simply staying invested, or adding to the positions you already own.
But a smarter way to take advantage of that rally is to focus on seasonal patterns.
I track seasonal trends based on sectors of the stock market. Not all sectors do as well as others during this time of the year.
The financial, energy and materials sectors, for example, tend to underperform from May through October. And oil prices tend to slump near the end of the year, but rally in the first four months.
I call these sector seasonal trends “prime seasons.”
One trend that started last week — and will offer better performance than the S&P 500 Index — is in the biotechnology sector.
Its prime season rises consistently over the next six months. If you stay invested during this time period, you’ll be able to capitalize on that rally.
An easy way to play it is with the exchange-traded fund (ETF) that tracks the sector: the iShares Nasdaq Biotechnology ETF (Nasdaq: IBB).
The ETF holds major biotech stocks including Gilead Sciences Inc., Biogen Inc. and Illumina Inc.
It may be difficult to forget about what happened last year, but the historical trend is clear.
And that’s how I’m playing the stock market.
Owning the IBB ETF gives you broad exposure to the sector, and it’ll allow you to benefit from the best six months of the year.
Chad Shoop, CMT
Editor, Automatic Profits Alert
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