An End-of-October Signal for Stock Traders

Jay Kaeppel

2025-10-31

Key points:

As October comes to a close, it can be helpful to look at how the stock market has performed during the first ten months
With one day to go, the S&P 500 is up 16% year-to-date
Historically, January through October gains in excess of 10% have presaged positive results over the next two months

When the S&P 500 is up 10% or more at the end of October

The chart below highlights all years since 1920 when the S&P 500 Index was up 10% or more for the year by the end of October. This has happened 42 times between 1920 and 2024. With the S&P 500 up 16% through the next-to-last trading day of October, 2025 is poised to be number 43.

The table below summarizes S&P 500 performance after October 31^st during the years highlighted in the chart above. The key thing to note is the performance over the next two months.

Key things to note:

86% Win Rate
4.2% Median Gain
An impressive Z-Score of 5.1

The table below displays all performance results for the S&P 500 after the end of October signals highlighted above.

The chart below displays the hypothetical growth of $1 invested in the S&P 500 only during November and December (using month-end prices) after the S&P 500 showed a 10%+ gain for the year through the end of October.

Notice anything about the chart above? The lack of severe declines is hard to miss. The worst performance to date was a manageable -3.8% decline in November and December of 1938. Of course, this doesn't mean the next two months won't show a loss, nor that a decline of more than -3.8% is not possible. In fact, intra-trade drawdowns exceeding -5% are not uncommon. However, the key point is that this setup represents a decent opportunity for a speculator willing to take a moderate risk over a two-month period.

What the research tells us…

Now that October appears poised to close with a year-to-date gain above 10%, is the stock market sure to move higher by year-end? Not at all. However, history strongly suggests that it is the way to bet. An 86% historical Win Rate during a typically seasonally strong time of year suggests favorable odds. Nevertheless, traders are encouraged to allocate capital intelligently and to contemplate what action they might take if things do not go as planned.