Seasonality Works

Many sophisticated investors look down at seasonality and view it as voodoo. I believe it is a very valuable tool. History has proven that seasonality works more times than not. The following table is from Mark Hulbert at Marketwatch showing market performance in the stronger months versus the weaker months.

 




























Dow’s “summer” gain — over the six months beginning on 5/1Dow’s “winter” gain — over the six months beginning on 11/1
20101.0%15.2%
2011-6.7%10.5%
2012-0.9%???
Average since 18961.7%5.1%


I learned the hard way that seasonality works by fighting the market at the strongest parts of the year earlier in my investment career. Seasonality is not a be all and end all. It is one of many indicators I use to form a market opinion.

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