"When in autumn the leaves begin to fall, stocks on Wall Street suffer worst of all…"

Since 1950, September, with an average loss of 0.5%, has been the worst month for the S&P 500 —ten times worse than February, the second-worst month. In the first week of September this year, the major indexes seemed to conform to this historical trend. The NASDAQ dropped 5.9% and the S&P 500 fell 4.3%, in 4 sessions. The Dow Jones Industrial Average plunged 7.4% in 7 sessions. However, as often happens on Wall Street, the unexpected occurred. By September month-end, the NASDAQ was up 2.7%, the S&P 500 gained 2.0%, and the Dow rose 1.8%.

October is often feared due to past market crashes (‘29, ‘87, ‘98, ‘07, & ‘11). But, it’s also the month when the market bottoms and turns around providing a buying opportunity. October marks the beginning of the "best six months,” which runs through April, giving rise to the adage "sell in May and go away." While the selling in May strategy didn’t work consistently from ‘94 to ‘97, it did in ‘98, ‘01, ‘02, and notably in ‘03 when a rally was ignited that lasted until October ‘07. Selling in May ‘08 was wise, as the mortgage crisis roiled the markets until it recovered in March ‘09. Corrections in May ‘10 and ‘11 lasted until October of those years.

From the March ‘09 low, the NASDAQ surged 677% until the COVID pandemic triggered one of the shortest, sharpest bear markets in history. Fearful investors who sold in May ‘20 missed out on a huge opportunity. By year-end, the NASDAQ was up more than 94%.

October is also significant for generating "follow through" days, a critical market signal indicating favorable conditions to buy stocks. Follow-through’s can happen in any month, but historically, October has produced the most buy signals. On September 13, ‘24, a follow through day was recorded, proving that overreacting to the brief, early September pullbacks ill-advised. Research categorizes rallies after follow through days based on their duration and extent, with whipsaw markets that go nowhere-fast, small gains (~3%), moderate gains, aka “money-makers (3%-15%), or "life-changing" gains (over 15%). Even modest market gains can result in top-performing stocks gaining 20% or more.

For the Disruptive Stock Strategy (DSS) to succeed, market conditions must be favorable, meaning indexes should stay above the 21-day moving average and ideally entering a "power trend." These trends increase the likelihood of achieving 15% gains. DSS focuses on companies with strong fundamentals, improving earnings, and growing revenues, both over 25% and ideally accelerating. With earnings season approaching, strong results are expected from key holdings.

Several factors support a positive market outlook: The Fed is cutting rates, there’s a strong job market, a strong economy with expectations of a recession fading, advancements in AI. Companies like Nvidia and ServiceNow, which integrate AI to enhance productivity, are at the forefront, with products in high demand and growing rapidly. Additionally, government programs are revitalizing the U.S. chip industry and creating jobs through the Infrastructure Act. These factors, combined with Goldman Sachs’ projection of a 5% rise in major indexes by year-end, suggest that individual stocks may perform even better.