U.S. stocks are seen rebounding after worst October in 5 years if this historical trend holds

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Joseph Adinolfi is a markets reporter at MarketWatch.

U.S. stocks capped off their worst October performance in five years on Tuesday, while clinching a third-straight monthly loss, the longest such streak since March 2020.But amid the gloom, some on Wall Street are holding out hope for a turnaround during the final months of 2023, even as high Treasury yields and the outbreak of war between Israel and Hamas continue to undermine demand for riskier assets like stocks.

While past performance can never guarantee future returns, the S&P 500, Nasdaq Composite and Dow Jones Industrial Average outperform during the final three months of the year, according to a Dow Jones Market Data analysis of average calendar-year performance. During each of those years, the index climbed in November. And with the exception of 1957, it continued to rise in December, according to an analysis of FactSet data by Carson Group’s Ryan Detrick.

“After the type of pullback we’ve had, November is supposed to be the best month, that’s what seasonality trackers say,” said John Stoltzfus, chief market strategist at Oppenheimer. “Somewhere between a 4% and 6% rally would not seem unreasonable to us,” he said during a phone interview with MarketWatch.

These include closely watched indicators like the relative strength index and popular sentiment gauges like the American Association of Individual Investors sentiment survey are two such examples.

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