One of the most noticeable patterns in nearly all of the world’s stock markets is that they tend to rise between the end of October and April. They then often range or drop in the summer months. This is where the ‘Sell in May, and go away’ saying comes from. At the moment investors are expecting a Fed taper announcement for November and this could weigh on stocks in the near term. However, the strong seasonal pattern for the Russell 2000 is worth being aware of.

Over the last 10 years, the Russell 2000 has risen eight times between October 11 and December 31. The average gain has been + 5.91%. The largest gain was +18.89% in 2020 and the largest loss was -12.02%.

Major Trade Risks: The main risk to this trade is if there is a sharp correction in stocks on the problem the Fed faces with surging inflation and potentially slowing growth due to supply chain issues.