Will November mark beginning of a new bull run?

We’ve had a year of higher-than-normal volatility, but this time of year is meant to be positive for stock markets.

After a plunge in September from summer highs to multi-year lows, the omens were not good heading into October, a month historically associated with large stock market declines. A volatile start confirmed investors’ worst fears, as political and economic extremes triggered wild gyrations in the price of currencies, bonds and stocks.

UK small-caps, American technology and even the broader S&P 500 index extended September’s sell-off into mid-October. Many indices hit their worst levels in two years or more, while the FTSE 100 hadn’t been as low in 18 months, getting within a whisker of 6,700.

As we said in this piece last month, October is one of the most volatile months for stock markets, but it isn’t the worst for performance. Stats from the UK Stock Market Almanac show that the FTSE All-Share has fallen only nine times during the month since 1990.

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That volatility was demonstrated perfectly by the Nasdaq Composite index, which lost over 1,000 points in a week, then took a fortnight to win it all back. With just one day’s trading left in October, the US tech index is up 5% in October. Elsewhere, the S&P 500 is up 8.8%, the Dow Jones 14.4% and the FTSE 100 2.2%. Just behind the Dow are the German Dax and French Cac, up 9.3% and 8.9% respectively.

While central banks took a break from policy decisions in October, market direction remained heavily influenced by speculation about the pace and extent of future interest rate rises. Inflation and employment data both here and in the US was heavily scrutinised, and investors everywhere tried to make sense of political events in the UK.

After a six-week stint as prime minister, Liz Truss resigned on 20 October, the victim of a radical budget which lost the support of financial markets and her own party members. Just days later, former chancellor Rishi Sunak was named PM, his job to unite the party, steady the markets and deliver a new budget that demonstrates how he’ll fill a financial black hole of as much as £40 billion. 

We’ll find out on 17 November when chancellor Jeremy Hunt sets out the government's fiscal plans, originally pencilled in for 31 October.

What will stock prices do in November?

This time of year has, historically, marked the beginning of a period of solid returns for stock market investors. The financial winter, which stretches from 1 November to 30 April, is statistically the best six months of the year to own shares.

To exploit this anomaly, we created Wild’s Winter Portfolios. You can read more about them here.

However, a recent run of poor form has made November a tricky month for investors. In the 16 years since 2006, the FTSE All-Share index has fallen 10 times. After positive years in 2019 and 2020, buoyed by the Covid pandemic, stocks resumed their lacklustre November performance, falling 2.5% in 2021.

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According to the Harriman Stock Market Almanac, November had been the least volatile month of all between 2000 and 2017. But more recent years have seen greater movement – in 2020, the All-Share index rallied 12.4% - and there are global themes at play currently which could easily cause wild swings in asset prices. Volatility, as measured by the VIX index, has been above the significant 20 level most of this year.

Although Rishi Sunak has promised a period of “boring” government, avoiding radical policies and instilling calm across financial markets, there is so much going on both domestically and internationally, that further shifts in sentiment in whichever direction seem inevitable.