Like clockwork, the S&P 500\’s best multiday rally of the year typically kicks off on Oct. 28, says Ryan Detrick, market strategist at LPL Financial. By studying the S&P 500\’s movement since 1950, he found the index enjoyed its most powerful average nonstop run in the nine days from Oct. 28 through Nov. 5.
Big individual stock winners during this period the past five years include technology play Enphase Energy (ENPH), health care Abiomed (ABMD) and consumer discretionary Mohawk Industries (MHK), says an Investor\’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
But it\’s a broad rally. How much of a rally are we talking about for the S&P 500? The S&P 500 jumped 2.4% in just those nine days on average, Detrick found. And it moved higher in each of those nine days.
A 2.4% gain might not sound like much. But remember, that\’s just a nine-day rally. A rally of that duration and magnitude translates into a nearly 70% annualized rise. That\’s roughly seven-times better than the S&P 500\’s usual annual return. \”The end of October and early November are historically quite strong,\” Detrick said in his analysis.
Seasonal Forces About To Kick In. Nothing is guaranteed with the S&P 500. But strength in late October is a rally investors grow accustomed to. And it\’s not just ancient folklore, either. The S&P 500 jumped 1.3%, on average, during the nine-day period in the past five years. In two of those years, 2020 and 2018, the S&P 500 surged more than 3%. A rally now would ease much of the market\’s angst, that kicked up in September.
There\’s also some fundamental underpinnings for an October rally. Third quarter earnings reports from S&P 500 companies are coming in much better than expected so far. More than 80% of S&P 500 companies topped earnings forecasts for the quarter, says John Butters, earnings strategist at FactSet. That\’s even higher than the 75% that did so in the past five years on average. It\’s still early in the reporting season, with less than 10% of the S&P 500 reporting. But early trends look strong.
Looking At The Best S&P 500 Stocks In The Best Days.
Enphase Energy, a leading provider of solar power gear, typically steals the spotlight this time of year. It has gained 8.5%, on average, from Oct. 27 through Nov. 5 in the past five years. That\’s a larger gain than any S&P 500 stock in the period. The stock jumped more than 20% during the S&P 500\’s late October rally last year.
Much hinges on the stock\’s upcoming earnings announcement set for Oct. 26. Analysts think the S&P 500 company will make 49 cents a share. And if they\’re right, it would be an increase of more than 60%. Enphase is seen benefitting from shortages and soaring prices of traditional energy sources like natural gas.
The next top S&P 500 during this seasonal rally is Abiomed, a maker of medical devices for the heart. Its shares jumped 8.2%, on average, from Oct. 27 through Nov. 5 in the past five years. It reports its third-quarter results on Oct. 28 of this year. Analysts, though, aren\’t looking for much this time. The company is only expected to post a profit of $1 a share in the quarter, down a hair from last year. For the year, though, profit is seen rising nearly 16%. So while Halloween lovers look forward to the end of October to show off their costumes, investors are looking forward to big annual gains in their portfolios.
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