The S&P 500 and DJIA recently closed at new all-time highs, thus regaining all that was lost during the 5.2% pullback from September 2 through October 4, observes chief investment strategist Sam Stovall, in CFRA Research's flagship newsletter, The Outlook.
This price recovery was largely driven by better-than-expected S&P 500 Q3 EPS, which are currently forecast to rise 29.6%, versus the 26.1% growth projected on September 30. Investors have now been given two more reasons to look forward to a favorable finish to the year.
First, history shows that following the recovery from the 60 bull-market pullbacks (declines of 5% to 10%) since WWII, the S&P 500 continued to climb an average of 8.4% over the following 98 calendar days before slipping into a new decline of 5% or more.
Second, from the October low through the end of December of each calendar year since 1945, the S&P 500 gained an average of 7.2% and recorded price increases in 92% of these years. As a result of the pullback recovery and this favorable seasonal pattern, history says, but does not guarantee, that the market should continue to notch additional new highs through year end.
In addition to the encouraging near-term track record for the market, history also reminds investors that the S&P 500 is poised to enter the best six months of the year. Indeed, from November through April since 1945, the S&P 500 rose an average 6.8% in price versus the 1.7% average gain from May through October.
And since 1995, while the 500 increased 7.1%, it was bested by mid- and small-caps, growth stocks, and the consumer discretionary, energy, industrials, materials, and tech sectors. What’s more, 98% of the 147 sub-industries in the S&P 1500 that have been in existence for 15 or more years also rose in price in this six- month period.
Representative companies from this list of S&P 500 sub-industries with the highest November-April returns: LKQ Corp. (LKQ), Amazon (AMZN), CONSOL Energy (CEIX), TJX Co. (TJX), Caterpillar (CAT), Eagle Materials (EXP), Cleveland Cliffs (CLF), and Louisiana-Pacific (LPX)