A Massive Month for Stocks Points to a 17% Gain

It was a banner October for the U.S. market...

The S&P 500 jumped 6.9%, its best October performance since 2015. The index also finished out the month with new all-time highs.

Clearly, the bull market is in full force. And history shows the gains can continue...

That's because October's gain was a historic move. Since 1950, only six Octobers have shown more growth. And those six instances led to even more gains in the market.

More than that, a massive one-month gain isn't a sign of the top. History shows that it generally means more upside is ahead. In this case, we could see 17% gains over the next year.

Let me explain...

Historically, October is the best month to own stocks. Since 1950, that month has yielded an average of 1.62% gains. That's two and half times better than the typical month. And only March comes close, with an average gain of 1.55%.

So it might not be surprising that last month was a big winner. Still, a 6.9% gain made it an October for the history books. Again, only six other Octobers have seen similar returns.

That return also followed the worst month for stocks so far this year. The S&P 500 fell 4.8% in September, but quickly catapulted to new all-time highs. Take a look...

So what happens to stocks after a move like this – not just an October rally, but any huge breakout month?

It's pretty simple... The trend tends to stay in place. Take a look...

Buying after similar big monthly rallies has led to 3.6% gains in three months, 7.5% gains in six months, and 12.7% gains over the following year.

That's already an improvement over a typical buy-and-hold strategy. For roughly 70 years, the S&P 500 has returned about 8.1% annually. But we can do even better...

As you can see, if we narrow our scope to include only breakout Octobers, the outlook is even more bullish. Take a look...

Those six instances led to 3.7% gains in three months, 12.5% gains in six months, and 16.5% gains over the next year.

That means stocks are primed to double their long-term return within 12 months... all thanks to October's incredible rally.

Of course, that comes from a small sample size... Again, setups like these have only happened six times in the past seven decades. But either way, record-breaking monthly gains in the S&P 500 bode well for the next year.

It might seem foolish to bet on higher prices after a record month. But history shows us it's exactly what you should do. And it's one more reason you want to be long stocks now.

Good investing,

Brett Eversole

Further Reading

"History shows that fear of buying at the top can do you more harm than good," Chris says. Buying into a strong uptrend is usually a great bet... And that's the setup in one commodity today. Learn more here.

One retail stock just staged a big breakout. Moves like this have signaled an accelerating trend... And it could mean 36% gains over the next year. Read more here.

Market Notes
ONLINE SHOPPING SENDS THIS CRAFT RETAILER TO NEW HIGHS

Today, we’re looking at a stock that has soared during the e-commerce boom…

Even before the COVID-19 pandemic, more and more people were turning to online shopping. It was easier and more convenient to shop from the comforts of home rather than going to a store. Now, e-commerce is more popular than ever. And that’s great news for today’s online retailer…

Etsy (ETSY) is a $35 billion global online marketplace. The platform allows people to buy and sell unique handcrafted and vintage items. From personalized home decor to clothing and jewelry, Etsy has made a name for itself as folks shop online… In the third quarter, Etsy’s revenues jumped to $532.4 million – up 17.9% year over year. And “habitual buyers” went up 65% year over year… which means the company’s fastest-growing buyer segment consists of folks who keep coming back.

As you can see, ETSY has rocketed higher. It’s up almost 800% from its March 2020 low… And shares just hit a fresh all-time high. As long as folks shop online for one-of-a-kind goods, Etsy is set to benefit…