We Just Entered the Best Three-Month Stretch for the Stock Market

The stock market has done well in 2021, with all four of the major North American indices all trading at or near record levels. The S&P 500 is up 24% year-to-date, the Nasdaq has climbed 23%, the Dow Jones Industrial Average has rallied 17%, and the TSX has advanced 22%.

It hasn’t all been smooth sailing, during the September slide, though. The S&P 500 lost 4.8% of its value, the NASDAQ tumbled 5.6%, the Dow slipped 4.3%, and the TSX lost 2.5% of its value. That rollercoaster of a month has been forgotten with stocks rallying in October to record highs.

Stocks Are At Record Highs, But Will They Keep Climbing?

These strong gains have led many economists to argue that stocks are more overvalued than ever and ripe for a pullback or correction, so it’s best to sit on your cash and wait by the sidelines. Stocks move in cycles, so there will be a correction of some sorts at some point. But there has to be a reason for that to happen. And right now, there isn’t.

The lasting effects of COVID-19 and inflation are certainly ongoing concerns, but for the most part, Wall Street and Bay Street have been churning out strong third-quarter earnings and announcing encouraging outlooks.

The Federal Reserve also announced that it will begin tapering its bond-buying program this month, citing substantial progress in the economic recovery. Along with the tapering, the central bank also signalled that interest rates would remain near record lows for the foreseeable future. A strong economic recovery and low interest rates is great for stocks.

And yet, despite the strong gains and fears of a correction, things could get a lot better. At least if history is any indicator. That’s because the best three-month period for stocks begins in November.

Since their inception, the Dow Jones Industrial Average (1896) and S&P 500 (1957) have both averaged a 3.4% gain during the November to January stretch. Over the same time frame, the Nasdaq (1971) has averaged a 6.3% gain.

It’s not the holiday spirit that sends stocks higher during this stretch. More people are pumping money into the stock market. In addition to strong earnings, a rebounding economy, and investor optimism, the strong performance can be attributed to people funding their investment accounts. In January, a lot of employers in the U.S. contribute to plans too.

With a large influx of cash hitting the markets, November to January may not be the best time to stay on the sidelines.

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The stock market is at record levels and investors are increasingly optimistic. On top of that, we just entered the strongest three-month stretch for stocks. If you’re thinking of taking advantage of this historically bullish period, the trading experts at Learn-To-Trade.com can help you trade more confidently and profit more consistently.

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To learn more about Learn-To-Trade.com’s stock market trading course, contact us at 416-510-5560 or by e-mail at info@learn-to-trade.com.