November historically is a top performing month as Q4 institutional cash inflows drive returns. The best consecutive three-month span is November-January. The month has taken hits during bear markets, -22.9% in 2000 was the Nasdaq Composite’s second worst month on record—October 1987 was worst.
November begins the best six-month stretch for the Dow Jones and S&P 500 Indexes, and the best eight-month stretch for Nasdaq. Small caps come into favor during November, but don’t really take off until the last two weeks of the year.
In pre-election years, November’s performance is substantially weaker. The Dow has advanced in only half of the last 16 pre-election years since 1950 with an average gain of 0.3%. The S&P 500 has been up in nine of the past 16 pre-election years, also gaining on average a paltry 0.3%. Small-caps and techs perform better with Russell 2000 climbing in five of the past nine pre-election years, averaging 1.0%. Nasdaq has been up in six of the last 11 pre-election year Novembers with an average 0.9% gain.
Options expiration often coincides with the week before Thanksgiving. The Dow posted 10 straight gains, 1993-2002, and has been up 17 of the last 22 weeks before Thanksgiving. Options expiration day has a clearly bullish bias, up 11 of the last 13. The week after expiration has been weak lately, down five of the last nine, but up 9.7% in 2008, the best November weekly Dow performance since 1950.
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 (Nov. 17, 2015), when the small-cap benchmark has risen just five times in the last 31 years. The Russell 2000’s average decline is 0.49% on that day. Recent weakness around Thanksgiving has shifted the Dow and S&P 500’s strength to mirror that of Nasdaq and Russell 2000 with the majority of bullish days at the beginning and end of the month.