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Market seasonality: Historically strong 6-month period ahead

4 mins read

Throughout December, we are once again reminded of the tendencies of market seasonality.

Although the market was up during the seasonally weak period this year, the last few months have been far from smooth-sailing and have lived up to the old market adage, “Sell in May, and go away.”

The past six months of the market has a track record of being a weak six-month period and we did see the market experience its fair share fits and starts, even though the weak season ended in positive territory.

From April 30 through close on Oct. 31, which marks the end of the seasonally weak period in the market, the Dow Jones Industrial Average was up 2.07 percent.

Those positive numbers don’t tell the whole story.

The first two months of the weak season were difficult, but ultimately, the market moved higher, culminating with a new all-time high for the markets in August. However, since peaking, we have seen markets cool off through the end of October.

The topic of market seasonality is not a new one, and as we have entered another of those seasonally-biased periods (November through April), November certainly started us off with a bang.

We are now entering what is typically considered the “seasonally strong six months” of the year.

Years ago, investors began using “The Stock Trader’s Almanac,” published by Yale Hirsch, and it has served as a fantastic source of information on the stock market. (We always order a number of copies for the office each year. If you would like to do the same, visit www.stocktradersalmanac.com).

The premise of its “Market Seasonality” study is essentially that the market has historically performed far better during the November through April time period than it has from May through October.

On its own, that isn’t a particularly profound statement or a particularly bold assertion, but when we examine the magnitude with which this effect has been chronicled over the years, it becomes a very significant underpinning indeed.

Consider this: If you would have invested $10,000 in the Dow Jones on May 1 and sold it on Oct. 31 each and every year since 1950, you would have lost money over the last 66 years!

This is to say that the entire growth of the Dow Jones Industrial Average since 1950 has effectively come in the “good” six months of the year.

This year in particular we have a number of other reasons to be “bullish” on the markets, but having the “seasonally strong period” on our side simply adds to our optimism.

This article was written by Dorsey Wright and Associates Inc., and provided by Charles Tumlin, managing director, TLS Wealth Management of Raymond James.

Tumlin is a financial advisor with Raymond James & Associates, Inc., Member New York Stock Exchange/SIPC located at 2015 Boundary Street, Suite 220, Beaufort SC 29902.

He can be contacted at 843-379-6100 or charles.tumlin@raymondjames.com or visit www.tlswealthmanagement.com

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