Bear Markets & "November to Remember"

When we invest or trade...it's easy to miss the proverbial "forest for the trees."

So while everyone on CNBC and Wall Street lays bets on today's Federal Reserve interest-rate meeting, that's all well and good but it may not be the most productive use of time.

Considering we're still only a few days into November...we might want to stop and consider how the idea of "seasonality" affects stock market performance, especially in the middle of a bear market.

"Seasonality" means there are certain points of the year where (here come the weasel words) ...on average...typically...most of the time...often...with pretty good odds...we can be relatively assured.... the markets will move higher.

For example, during midterm election years like this one....if we plot out the market's ups and downs...since 1954 there's a statistical tendency for the stock market to bottom in late September/early October and move higher from there.

Sounds pretty good, right?

But as some smart researchers have pointed out recently - we have to remember that the indexes spend most of their time in bull markets - when stocks are bound to move higher anyway.

So here's the important question...

If there's a bear market going on during a midterm election year...what does the stock market's performance look like?

Answer: It's downright lousy.

In fact, if we look at the red line on the chart below...during bear markets - November tends to be a month where the "year end rally" fails...and then fades away:

That's why I wanted to bring this chart to your attention. None of it is written in stone - nothing is in the stock market.

But if we look at November during bear-markets-in-progress, we can see why the month winds up being a "November to Remember" for all the wrong reasons.

Here's 2008...it was a bear market, but a presidential election year not a midterm election year. But November was still pretty ugly:

In 2002, a midterm year and the last stages of a deep bear market - November wound up marking the high point of a vicious rally that "rolled over" right after Thanksgiving:

Likewise, November 2000 was the month that convinced tech investors the dotcom bubble was going to be a lot more painful that many had thought:

I won't belabor the point too much further. But in 1982, the market was struggling through a drawn-out bear market with high interest rates (sound familiar?). November turned out to be the peak of another "heart-breaker" rally:

And in 1974, also a midterm election year and deep bear market...

So there you have it. While November is typically a great time to put new money to work in the market, and this year might be the same...we're still in a bear market, and bear markets sometimes bring different rules.

Jeff