The U.S. stock market is on a roll—and it can keep on rolling if the past is any indicator.
The S&P 500 rose for six months between April to September, something that has only happened six times since 1928. And each of those times, the stock market has gone on to notch strong gains for the remainder of the year, according to strategists at Bespoke Investment Group in a Monday note.
In the previous years that this has happened, the S&P 500 has risen four out of five times in October for an average gain of 2.38%, compared with 0.61% for all Octobers.
Bespoke Investment Group
“Gains beget gains!,” said Bespoke strategists.
A solid April-to-September performance also has been a positive signpost for market performance in the fourth quarter, with stocks notching an average rise of 9.2% in the final three months of the year.
On top of the strong seasonal trend, investors may get a lift from politics.
LPL Financial
Read: Should investors fear October, a historic ‘jinx month’ for stocks?
During midterm years, October has been the best month for stocks going back to 1950 with the S&P 500 rising an average 3.3% in the month, according to Ryan Detrick, senior market strategist at LPL Financial.
The strategist pointed out that some of the biggest market crashes occurred in October which might lead people to think that it’s a bad time for the market.
“But the reality is it isn’t that bad overall, it is more an extremely volatile month,” he said.
And despite the upbeat signs, at least one strategist warned that there are troubling undercurrents given the number of stocks hitting 52-week lows.
The S&P is within 0.35% of its 52-week high, yet more than 5% of NYSE securities have sunk to a 52-week low. That has occurred on 14 days since 1965, with 13 of them leading to a negative return two months later.
We better hope that positive seasonality thing is for realz.
— SentimenTrader (@sentimentrader) October 1, 2018
For now though, the market remains on an bullish trajectory with the S&P 500 and the Dow Jones Industrial Average DJIA, +0.73% trading near records.
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