Why history shows this year's stock losers can be November winners

Evercore ISI analysts, led by Julian Emanuel, observe that despite overall market gains, a substantial portion of Russell 3000 constituents remain down year-to-date, intensifying the impact of tax-loss harvesting. Historically, the worst-performing quintile of Russell 3000 stocks from January through October has shown a tendency to outperform in November, averaging a 2.7% bounce as incremental selling pressure from tax-loss strategies subsides. This trend presents a tactical opportunity, with Evercore identifying specific 'Tax Loss Tacticians' candidates, including major firms like UnitedHealth, Accenture, and Adobe, that could see a post-October rebound.

Analysis

Despite the S&P 500 nearing its 35th record high and the Russell 3000 gaining 15% year-to-date, Evercore ISI highlights a significant market disparity, with approximately half of the Russell 3000 constituents still down for the year, exceeding the historical average of 35% for similar index gains. This elevated proportion of underperforming stocks intensifies the impact of mutual fund tax-loss harvesting ahead of the October 31 fiscal year-end, potentially creating additional downward pressure.

Historically, this dynamic presents a tactical opportunity. Evercore ISI research indicates that since 1990, the worst-performing quintile of Russell 3000 constituents from January through October has shown a consistent tendency to outperform in November, averaging a 2.7% bounce as incremental selling pressure from tax-loss strategies alleviates. This trend suggests a potential reversal for deeply discounted stocks.

Leveraging this insight, Evercore ISI has identified specific "Tax Loss Tacticians" – stocks that have underperformed significantly but are rated neutral to attractive. Notable examples from their list include UnitedHealth (UNH), Accenture (ACN), and Adobe (ADBE), which are positioned as potential outperformers in the upcoming month.

Key Decisions for Investors

• Investors should consider initiating tactical long positions in Evercore ISI's identified "Tax Loss Tacticians" candidates, such as UNH, ACN, and ADBE, anticipating a historical November rebound as tax-loss selling pressure subsides
• Monitor the market's reaction post-October 31 for signs of reduced selling pressure and potential outperformance in these deeply discounted stocks
• Evaluate the fundamental strength and long-term prospects of these underperforming assets to complement the technical tax-loss harvesting strategy