Can FTSE 100 repeat last year’s November rally?

Despite ending the October off their worst levels, not a single one of the world’s major stock markets ended the month in positive territory. And “no” is the answer to the question I asked a month ago about whether the FTSE 100 would keep its crown as world No.1 in October!

In a month that saw a return to conflict in the Middle East and ongoing speculation around the future for global interest rates, it was the Dow Jones that topped the performance table in October with a 1.4% loss. As investors digested the rush of corporate results during US earnings season, the S&P 500 fell 2.2% and the Nasdaq Composite tech index 2.8%.

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This is the first time the S&P 500 has fallen for three months in a row since the pandemic in March 2020. While we didn’t see the scale of reversals seen in 1929, 1987 and 2008, the S&P 500 did enter correction territory near month-end, having fallen over 10% since the July high at 4,600.

And October did live up to its reputation as one of the most volatile months. According to the VIX index, last month was the most volatile since March, spending plenty of time above the 20 level which is considered high, peaking at 23 in the second half of the month.

Our own FTSE 100 fell 3.8% in October and the FTSE All-Share index 4.2%. Three-quarters of the top 100 index ended in the red, headed by Rentokil Initial (LSE:RTO), down 31.7%. NatWest Group (LSE:NWG)’s results guaranteed a 24.4% loss for the high street bank, St James's Place (LSE:STJ) slumped 23.1% and Ocado Group (LSE:OCDO) 22.5%. Old-school defensive stocks prevented a complete whitewash, led by utilities Severn Trent (LSE:SVT) and United Utilities (LSE:UU.).

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Investors remain very much divided into those who believe it’s not just the big tech stocks that are overvalued and those happy to buy the dips. And market commentators are split on whether equities are on the precipice or represent good value after the recent pullback.

If history is any guide this should be a good time to invest, and certainly better than the summer months. According to decades worth of data, the six months from the end of October to end of April have been the most profitable time of year for equity investors.

We created two winter portfolios to exploit this seasonal anomaly. Now in their 10th year, the latest edition launched this week. You can find more information on our Winter Portfolio page.

What will share prices do in November?

November 2022 turned out to be one of the best months for investors. The FTSE All-Share jumped 6.8% and the FTSE 100 only a fraction less to register its best month in two years. That the Nasdaq Composite was among the worst performers with a gain of 4.4% tells you just how strong the month was.

Investor optimism was buoyed by hopes of demand recovery in China and lower-than-expected US inflation. The bounce-back also came just weeks after then prime minister Liz Truss triggered market turmoil with a disastrous mini-Budget.

The winter portfolios are a six-month strategy with a strong history of positive performance, but they don’t always get off to a rapid start. And as we reported 12 months ago, it has been difficult predicting what will happen at this time of year.

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In the 16 years between 2006 and 2021, the FTSE All-Share index fell in November 10 times. It rose sharply in 2019 and 2020 but fell in 2021 before rallying last year.

According to the Harriman Stock Market Almanac, November had been the least volatile month of all between 2000 and 2017. But things have changed, especially since the pandemic. Investors could do with a period of calm, but that looks very unlikely the way things stand.