Wall Street enters the best window period of the year; can U.S. stocks rise even higher?

The U.S. stock market is about to enter its best six-month performance in history, having ignored Wall Street's popular adage of "sell in May and go away," maintaining a strong upward trend since the beginning of the year.

However, investors are still wondering whether the stock market's surge will lose momentum in the coming months as U.S. Treasury yields rise and concerns about the upcoming presidential election intensify.

History shows that November to April of the following year is the best six-month window for stock market performance. Sam Stovall, Chief Investment Strategist at CFRA Research, stated that the average return of the S&P 500 during this period is the highest compared to any other six-month window since 1945.

According to data compiled by CFRA Research, since World War II, the average return of the S&P 500 from November to April of the following year is nearly 7%, while the average performance during the remaining six months is only 2%.

But this year is different. According to Dow Jones Market Data, the S&P 500 has risen more than 16% since April 30 and is on track to achieve the largest increase from May to October since 2009. This builds on a 20% increase from November of the previous year to April of this year.

Stovall wrote in a client report on Monday, "Double-digit returns have led investors to question whether the market has exhausted its upward momentum and may enter a difficult period. History suggests otherwise. Instead, previous strong momentum often serves as a precursor to the upcoming November to April window, although this is not guaranteed."

Since 1945, the S&P 500 has risen 10% or more during the May to October period 12 times, and the subsequent November to April period has seen an average increase of 13%.

Additionally, the S&P 500 has achieved double-digit gains in both the November to April and May to October periods five times, while large-cap indices recorded positive returns in the subsequent November to April period four times, with an average increase of 11%. Stovall noted that this suggests the current progress is likely to continue further.

CFRA's data shows that the November to April window is not only favorable for U.S. large-cap stocks but also for small-cap stocks like the Russell 2000 Index, the MSCI EAFE Index, and the MSCI Emerging Markets Index, which have "significantly outperformed the market."

It is certain that many investors are concerned that the recent tension surrounding the U.S. election, which has begun to overshadow the stock market in recent weeks, could end the market's rebound in the last two months of the year.

Last week, the sharp rise in U.S. Treasury yields shocked the stock market, with long-term Treasury yields soaring to their highest level in nearly three months, as concerns grew that the new government—whether led by Republican Trump or Democrat Harris—could exacerbate the U.S. government's fiscal deficit The yield on the 10-year U.S. Treasury bond traded above 4.3% on Tuesday, and over the past year, when it broke through this key technical level, the stock market often experienced a difficult period.

José Torres, a senior economist at Interactive Brokers, stated, "U.S. stocks have risen 23% year-to-date, is there more room for growth? The S&P 500 has performed well over the past 10 months but is still lagging behind the pace of recent years. In the first 10 months of 2023, 2021, 2019, and 2013, investor returns were 24%, 27%, 29%, and 30%, respectively."

In comments via email on Tuesday, Torres said, "For the stock market to continue rising, investors need to see a 'red wave' (a Republican landslide), positive comments on AI during corporate earnings calls, easing economic data, and a calmer interest rate market."

Stovall stated in an interview that the stock market will continue to climb, surpassing its "well-known wall of worries." He indicated that stock prices will rise due to expectations of further rate cuts by the Federal Reserve and favorable economic data, "which will be accompanied by a surge in tech company earnings."