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Home / Business / Stocks should set a new record in November, if history is any guide

Stocks should set a new record in November, if history is any guide



The S&P 500 hit a high time of over 3000 on Monday, and if market history is any guide, November may soon produce another record.

The fourth quarter of the year tends to be the strongest period for equities. The month of November in particular has been among the best months of the year for the markets over the past decade.

All three major indices have traded positively 80% of the time in November since 2009, according to a CNBC analysis by Kensho, a hedge fund analysis tool. S&P achieves an average of 1.8%, while Nasdaq adds over 1.6% and Dow Jones industrial averages have been up, an average of 2%.

Dow had the highest average return in November of the last decade, but S&P reached a new record, primarily due to a stock's rough patch: Boeing has been a major draw on the Dow of late.

The S&P 500 on Monday near topped a record set on July 26. Shares had suffered since the summer, but S&P is now up 6% from its lowest in August. Several factors contributed to the stock market.

Higher-than-expected earnings led to increased confidence in Wall Street. Walgreens Boots Alliance, AT&T and Spotify were among the companies reporting stronger than expected profits on Monday.

"The market is finally breaking out of this trading area and it is on the rise," Andrew Slimmon, CEO of Morgan Stanley Investment Management, told CNBC on Monday. Speaking about the strength of cyclical stocks, Slimmon said, "If the economy gets a really bad update, those stocks wouldn't recover. The financial data has been better than expected. Earnings have come in better than expected."

The top sectors in the second to last month of the year, according to the CNBC analysis of Kensho data, are industry, consumer estimates and materials.

There have been signs of progress in US-China trade talks, which has helped to increase the stock. The US Commerce Representative's Office said in a statement last Friday that the nations "are heading for specific issues, and the two sides are close to completing some parts of the deal."

The market also expects the Federal Reserve to announce another interest rate cut on Wednesday.

"This will be the third interest rate cut, and it's been a kind of magic sauce in the 1990s to stop growth from slowing down," Evercore ISI Chairman Ed Hyman told CNBC's Squawk Alley on Monday. "They feel that they are in some kind of familiar territory if this works out, and the stock market rally is a suggestion that it works."

The S&P 500 closed at 3039.42 on Monday, a level that market technicians are displaying with confidence.

"The technical backdrop got better last week when SPX finally distanced itself from the magnetic 3000-point level," Craig Johnson, chief engineer at Piper Jaffray, told CNBC during trading on Monday. "A close above 3,026 will validate a record-breaking outbreak and probably open the door to a new leg higher," he added.

Apple, UnitedHealth and JPMorgan Chase are among the stocks that help the S&P 500's bid to new record highs. Apple shares are up more than 11% in October amid optimism surrounding the sale of iPhone 11. A recent CNBC analysis of Apple stock trading at Kensho suggests that Apple's wave may continue through the end of the year.


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