S&P 500 Could Benefit From Seasonality In November, But Macro Risks Remain High

From a historical point of view, November is one of the best months of the year for stock markets. Over the last 39 years, the S&P 500 has risen 62% of the time, for an average gain of +0.82% in November. However, since 2001, it has been the second-best.

November usually starts well, with the S&P rising in the first five days, and then takes it easy until just before Thanksgiving. Here are some historical stats for the month:

• Over the last ten years, the S&P 500 has risen on average +1.26% 9 out of 10 times
• Over the last 20 years, the Dow Jones Industrial Average posted positive results 70% of the time for an average +1.57% return
• Over the last 50 years, the Dow posted positive results 70% of the time for an average +1.99% return
• Over the last 100 years, the Dow posted positive results 63% of the time for an average +1.18% return

The worst November since 1950 was in 1973 when the S&P 500 fell 11.39%.

The best November since 1950 was 2020, with an appreciation of 10.75%.

54 Falls Of 1% Or More

Despite the positive seasonality, the S&P 500 fell 2.50% on Nov. 2. This marks its 54th drop of 1% or more so far this year. You'd have to go back to 2009 to see something similar, and there are still two months to add to that number.

If we take the S&P 500 since 1928, 2022 ranks 12th in terms of years with the greatest number of declines of 1% or more. The eleven years ahead are:

1. 1931 (97)
2. 1932 (95)
3. 1933 (75)
4. 2008 (75)
5. 2002 (72)
6. 1930 (70)
7. 1974 (67)
8. 1938 (67)
9. 1937 (62)
10. 1934 (59)
11. 2009 (55)

Nasdaq Within Striking Distance Of Yet Another Grim Milestone

If the Nasdaq were to close lower this quarter it would imply its four quarterly declines in a row.

This would equal the worst streak of quarterly losses (in terms of duration) in the last 51 years.

The Intraday Effect in 2022

It turns out that if we had only traded the S&P 500 intraday so far this year, i.e., buying at the open and closing before the bell, the return would have been -1.9%.

However, over the same period the year to date loss on the index is over 10 times that. 

Investor Sentiment (AAII)

The bullish sentiment on the S&P increased by 4% to 30.6% but remained below its historical average of 38% for the 50th consecutive week.

The bearish sentiment fell 12.8% to 32.9% and remains above its historical average of 30.5%.

Source: AAII

Stocks Exposed to China

As China's economy continues to underperform, risks for companies with large exposure to the Asian giant keep mounting. 

Here is a list of S&P 500 companies with at least 20% of exposure to China, according to S&P Global Market Intelligence data:

• Monolithic Power Systems (NASDAQ:MPWR): 55.5%
• Texas Instruments (NASDAQ:TXN): 53.5%
• Estée Lauder Companies (NYSE:EL): 33%
• Applied Materials (NASDAQ:AMAT): 32%
• KLA Corporation (NASDAQ:KLAC): 29%
• ON Semiconductor Corporation (NASDAQ:ON): 28.5%
• Qorvo (NASDAQ:QRVO): 27.5%
• Amphenol (NYSE:APH): 27%
• Nvidia (NASDAQ:NVDA): 26%
• Tesla (NASDAQ:TSLA): 24.5%
• Western Digital (NASDAQ:WDC): 24%

Disclosure: The author currently does not own any of the securities mentioned in this article.