There's no sugarcoating it, folks...
Many investors have been scared in recent weeks.
We watched well-known names in the tech industry report stellar revenue... only to have the stock prices crater by weary investors.
This happened as CNN's Fear and Greed Index reported the highest levels of investor fear since April.
When my colleague Ethan Goldman initially discussed this sentiment gauge on November 6, it stood at 24 out of 100. As he noted, that's an "Extreme Fear" reading.
In its reading earlier this morning, the Fear and Greed Index came in at 32 out of 100. That's "Fear" territory.
However, this doesn't mean you need to panic right now...
In fact, historical data says that November may finish out stronger than anyone expects.
Let's take a look...
Your Portfolio Has Likely Outperformed in Past Novembers
As regular readers know, we track the broad market S&P 500 Index with the SPDR S&P 500 Fund (SPY). And we track the tech-heavy Nasdaq 100 Index through the Invesco QQQ Trust (QQQ).
Now, when we look at the monthly gains of those funds over the past 10 years, we see an interesting pattern emerge...
SPY grew an average of 4.1% for the past 10 Novembers. That's 0.7% more than the next-best month of July.
In fact, the only November that SPY shrank in the past 10 years happened in 2021.
And a similar trend emerges with QQQ...
Over the past 10 Novembers, QQQ saw an average of 4% growth. But this time, July is stronger than November by a mere 0.6%.
Like SPY, QQQ only shrank during one November in the past 10 years. That was in 2018, when QQQ lost 0.3% for the month.
Of course, historical trends don't guarantee that this will end up being an amazing November...
But two key events this month could send the markets soaring back to the average (or they could send them spiraling down to a statistical anomaly)...
Two Big Events This Month That Will Impact Your Portfolio
Regular readers will recall that early last month, Ethan discussed the potential effect of the government shutdown on the markets...
Remember that the previous government shutdown happened at the end of 2018. And SPY surged more than 10% in those 35 days.
Now, the current shutdown has lasted longer than the previous one. And unfortunately, we haven't seen SPY grow anywhere close to 10%.
But on Monday, both SPY and QQQ rallied when news broke that the shutdown could end soon...
Some investors are waiting for the government to reopen before making large moves.
It's hard to blame them. The lack of recent economic data leaves folks with less information to base their trades on.
However, the shutdown looks poised to end. And it's possible that the actual end of it could send the markets higher. (On the other hand, if negotiating progress stalls at this point, the markets could move sharply lower.)
Also keep in mind that tech titan Nvidia (NVDA) is due to report its earnings on November 19...
Nvidia is the largest company in the U.S. It has a roughly $4.7 trillion market cap.
The company has about an 8% weighting in SPY. And it has a roughly 10% weighting in QQQ.
Even if Nvidia reports higher-than-expected earnings, anxious investors may still pummel the stock...
And considering the company's huge weightings in SPY and QQQ, any major gain or loss in the share price will move both funds more than any other company could.
Folks, my point is simple...
I expect this November will end on a positive note for stocks – just like the past nine out of 10 Novembers.
So, stay optimistic. But just like in any market environment, don't get overly complacent, either.
Good investing,
Vic Lederman
