28.1.2013 > Articles > CyclesComment
Print

The Market's History Of Seasonality Continues

Once again, the stock market's favorable season is producing an impressive rally. The Dow has gained more than 10% since its November low, with the rally accelerating in the new year -- a 7% gain in just the last 4 weeks.

There are certainly reasons for optimism and the market rally.

As it has for the last three years, the economic recovery has resumed impressively after its summer stumble. Most U.S. economic reports, in housing, employment, retail sales, manufacturing, are beating even optimistic forecasts. The eurozone debt crisis has moved out of the headlines, ECB president Draghi's promise of "whatever it takes" having successfully kicked the crisis down the road. In Asia, fears that China's economy was slowing into a hard landing have been alleviated by several months of much better than expected economic reports.

The political uncertainty of the U.S. Presidential election, and the unusually divisive election campaign, is now history. The more recent concerns, that an agreement to extend the Bush-era tax cuts would not be reached by year-end, and that the debt ceiling would not be raised in time to prevent the government from shutting down by mid-February, have been kicked down the road by several months.

What is it about winter months?

It never ceases to amaze me how background conditions work out to continue the long history of the market making most of its gains each year in the winter months (and when there is a correction of any degree, it almost always takes place in the unfavorable season between May and November).

It's not just a phenomenon of the U.S. market. Academic studies show similar seasonality in the markets of 36 of 37 developed countries.

The favorable season traditionally lasts until May, and Congress has pushed the debt ceiling deadline out to mid-May to give both sides more time to hammer out a budget agreement.

So there are reasons to expect the favorable season rally to continue, and I and my subscribers remain 100% invested in our Seasonal Timing Strategy portfolio, and 80% invested in our non-seasonal Market-Timing Strategy, enjoying the ride and expecting more gains ahead.

There is certainly a tremendous amount of cash on the sidelines earning next to nothing in savings accounts and bond funds to fuel a further rally. And there is evidence that previously bearish and pessimistic investors who took money out of the stock market in 2009, 2010, 2011, and right up until mid-year last year, long after the new bull market began in early 2009, are now pouring money back in.

Zdroj: Street Smart Report Online


RELATED ARTICLES


COMMENTS

ADD A COMMENT
BE THE FIRST TO COMMENT

TOP ARTICLES

Week | 2 weeks | Month
RatedReadCommented

TOP CHARTS

Week | 2 weeks | Month
RatedViewedCommented

COMMENTS

Week | 2 weeks | Month
RatedRecently added
You are not logged in!   |   Login   |   Register   |   Forgotten password