- A historical pattern suggests that years following negative performances in August, September, and October often see strong November and December gains in the stock market.
- But, Geopolitical turmoil in the Middle East has driven gold prices toward $2,000 and there's always a possibility that the risk appetite might rise as conflict worsens.
- Therefore, the stage is set for November to be an eventful month for the financial markets as we will find out whether gold or the stock market comes out on top.
As we step into November, there's a sense of uncertainty in the air. Historically, this month has been bullish, especially for the S&P 500 and the Dow Jones Industrial Average. So, investors have their eyes on a pattern that has historically sent these indexes soaring during this period.
However, if the Middle East conflict heats up, people might flock to safety as risk-off sentiment rises, boosting the demand for gold.
While it remains unclear whether gold or the stock market will come out on top in November, let's look at both asset classes to evaluate the main pros and cons of investing in either of them right now.
Stocks: The Magic of November
November has historically been a standout month for the Dow Jones, consistently delivering positive results. Over the last 100, 50, and 20 years, the Dow has averaged gains of over +1% for the month.
In fact, in the last 20 years, November has recorded an impressive +1.99% gain, second only to April. The historical data supports this positive trend, making November an exciting month for investors.
The S&P 500 follows a similar pattern, making November the best month in terms of performance since 1950. This trend continues, even in recent years, making November the second-best month since 2001.
The month usually starts strong with gains in the first five days, followed by a steady climb until just before Thanksgiving. November, therefore, has two consecutive periods of gains, from the 1st to the 5th (+1.38%) and from the 23rd to the 30th (+1.48%).
Moreover, over the last 95 years, there have only been 9 years in which the S&P 500 closed negative in the months of August, September, and October.
What's intriguing is how the market has historically performed in the following months, notably in November and December.
In the years following negative August-September-October stretches, the market has often seen strong November and December performances.
For example, in 1952, the market saw a +4.65% increase in November and a +3.5% increase in December. Similar trends have been observed in 1957, 1977, 1990, and 2016.
While history doesn't always guarantee future results, it often rhymes. The magical patterns of November and December have consistently provided opportunities for investors in the past.
As we enter November 2023, the stage is set, and all eyes are on the stock market to see if history will once again rhyme and bring joy to investors in the upcoming months.
The potential for a positive trend is certainly worth watching, making November an exciting month for investors in the stock market.
Can Gold Continue to Shine as Mideast Geopolitical Turmoil Spreads?
In recent times, the market has been guided by a mix of positive macroeconomic data and concerns surrounding the ongoing conflict in the Middle East, creating an interesting dynamic for investors.
The key question on everyone's mind: Will the Fed continue to raise interest rates?
The latest economic indicators have cheered the market, with growing optimism that the Fed may halt further interest rate hikes.
However, the looming threat that the Middle East conflict will continue to spread has cast a shadow over investors' appetite for risk.
In this complex scenario, one asset has taken center stage once again – gold. Gold recently breached the $2,000 mark for the first time since May, recording its most substantial monthly gain since July 2020.
Notably, it has seen a remarkable 9% surge since October 7, when the conflict escalated (remember that gold reached an all-time high of $2,075.47 in 2020).
The Middle East conflict shows no signs of abating, and the situation may yet worsen. The enduring safe-haven nature of gold remains firmly intact, supporting its upward trajectory.
It's crucial to note that the prospect of the conflict expanding to a region crucial to the world's energy supply has rattled financial markets.
Currently, gold futures face resistance, unable to break through the $2,013.50 level. A decisive breakthrough would provide additional momentum, potentially propelling gold to higher levels.
Conclusion
While things may seem bullish for the stock market and gold, the question remains: which asset class will end up rallying in November?
One path is illuminated by a historical pattern that suggests a bullish trend, particularly for the stock market. November has often been a magical month for equities, marked by historical tendencies toward gains.
On the other path, geopolitical tensions, particularly in the Middle East, cast a shadow over investor risk appetite and illuminate the appeal of gold. The precious metal has recently surged above $2,000 as a safe-haven asset.
Investors now watch closely, with the question of whether the stock market will rally or gold will surge amid geopolitical turmoil.
The coming weeks will reveal which sentiment ultimately prevails. November promises to be an exciting and eventful month in the financial markets.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.