It's Halloween and the markets have had an anxious rise to highs over time, but if this statistical trend for stock standards holds up, there's a lot more room to run.
Dow Jones Data Group data going back to 1950 indicates that when the Dow Jones Industrial Average
and the S&P 500 Index
is up with the same measure at the end of October as they are now, return for the rest of the year is only guaranteed.
Besides, these gains are remarkably amazing.
When Dow is up at least 15% in the year to the end of October, the index has an average return of 5.55% over the next two-month period, with an average year-to-date return of 27, 17%. The Dow was up 15.81% so far on Thursday (see attached chart).
Similarly, when the S&P 500 has achieved at least 20% to date – up 21% so far on Thursday – the benchmark return is 6.21% on average for the remaining period, with an average annual target gain of 33.80% (see table below).
Although Nasdaq cannot boast such an impeccable record, the index has gained 90% of the time as it is up by at least 20% at this time of year (it's up 24.8 % so far in 2019), data shows, with an average return of 7.48% for the remaining two months and a gain at year-end of 42.81%.
To be sure, past results are absolutely no indication of future returns, and US stocks on Thursday have already cut lower amid growing concern over the likelihood that the US will be able to draw up a real trade deal with China soon and a reconciliation inquiry vote linked to President Donald Trump was passed in the House.
That weakening comes a day after the S&P 500 index hit a record near the wake of a Federal Reserve decision to cut interest rates for the third time this year, while signaling that it would pause before taking further action against monetary policy.
After crossing a target of political concerns, including the US trade conflict with China and Britain's long-awaited plan to leave the EU, all three reference plans are underway to end a historically unstable period for equities on positive territory. The Dow is up 0.4% so far in October, and the S&P 500 has a 1.9% month-to-date gain, while the Nasdaq has jumped 3.7% so far in October.
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October trading did not start on a strong note, but Dow, S&P 500 and Nasdaq recorded at least 1% back losses before becoming stable to start the month.
Now stocks are entering what has historically been a strong period for the stock markets. Historically, November to January marks the start of the best three-month spread of the year, with average November gains of 5.94% and those for 5.1%.