Following seasonal trends works.
Perhaps the best proof of this thesis lies in the fact that the majority of global markets have recently experienced 100%-plus annual gains occurring between November and May. At the same time, they have been lacklustre in the June to October period and negative from August to September.
In the period from 1979 to 2008, the average gain for the TSX between Nov. 1 and May 31 has been 11%. From June 1 through October 31, Canada’s benchmark index has averaged an increase of just 0.1%.
This data, provided by UBS strategists George Vasic and Garry Cooper, is further strengthened by annualized gains of 12.1% over the past 30 years for balance seasonal portfolios titled to stocks from November to May and bonds the rest of the time. That compares to 10.4% for neturally weighted portfolios and 8.6% when the weightings are reversed.
And what does seasonality suggest for sector trends?
Mostly positive, given that there are four more months of seasonal support ahead of us. Energy, fertilizers and financials have the best prospects, while health care and technology have proven to be laggards.