How Will Stocks Spend Their Holiday Season?

Written by Monica Sandler

Monday, 01 December 2008 14:08

October was another month of struggle for the markets. Dow Jones Industrial Average fighting for the 10,000 level, CBOE Volatility Index soaring to over 30 (hasn't done that since July), weakening dollar, and oil prices hesitating which way to go from $70 a barrel. These are just a few signs that market recovery is nearing its saturation point, and market participants hesitate what to do next. In search for the answer, we look how the markets performed in different months in the past.

Historically, the period from September through October has been the weakest performing term for stocks, and November hasn't been outstanding either. September has been a poor month for stocks 49 times out of 80 (that makes 61%), with Dow Jones posting an average loss of -1.46%. In October, stocks have posted gains 59% of the time, but some unusually large losses have outweighed the gains, so the month's average is near break even.

As November passes, we are now entering the strongest performing month of December. On average, the Dow Jones gains 1.44% during the month, winning 73% of the time. Ameri-Financial senior strategist Sean Levin explains: "This is the time when companies and funds take profits for the year in order to show stronger annual revenues. Those transactions have always benefited Wall Street."

Historically, January has been a great month as well. With an average gain of 1.22%, it's been a winner 66% of the time. Another good month is April, which is actually the second best performing period after December.

There actually aren't many down months throughout the calendar. May and October are the only months beside September which traditionally post losses, but the losses small: just -0.16% and -0.02% respectively.

Let's hope that history will prevail this time again, and we'll see a continuing revival in the economy in the coming months.