A Truism that is Demonstrably True

Most people are probably aware of the adage “sell in May and go away”. This popular seasonal Wall Street truism implies that the market’s performance is far worse in the six summer months than in the six winter months. Numerous studies have been undertaken in this context particularly with respect to US stock markets, and they  confirm that the stock market on average exhibits relative weakness in the summer.

 

Look at the part we highlighted – it is downright eerie, Mark Twain somehow knew! [PT]

 

What is the status of the “sell in May” rule in other countries though? I have examined the patterns in the eleven most important stock markets in the world..

 

The Eleven Largest Markets in the World Under the Seasonal Microscope

I have taken a look at the popular benchmark stock indexes of the eleven countries with the largest market capitalization from 1970 onward, or starting from the earliest year from which continuous price data are available.

The comparison divides the calendar year into a summer half-year from May to October and a winter half-year from November to April. The position is assumed to be closed out on the first trading day of the following month. In the respective half-year in which no position in stocks is taken, a cash position that earns no interest is assumed to be held, so as to avoid any distortions of the stock market’s seasonal returns by including interest income.

This much I will say in advance: The results are clear, in all eleven countries the winter half-year outperformed the summer half-year significantly. In five of these eleven countries one would actually have lost money during the summer half-year on average! These countries are:

 

  • France
  • Germany
  • Japan
  • Taiwan
  • United Kingdom

 

In other words, in these countries it would have been definitely better to go on vacation in the summer months – or to invest elsewhere.

 

Detailed Results by Country

The following table shows the half-year results of the eleven countries in detail. Half-year periods in which it was profitable to be invested on a risk-adjusted basis are highlighted in green. Half-year periods that generated losses are highlighted in red.

 

Overview of Country Selection: Half-Year Results

 

Investing during the summer period was only profitable in two countries

 

The table underscores that the summer weakness (a.k.a. the “Halloween Effect”) does indeed exist. In this case we are once again looking at a very simple and well-known rule. There exist a great many more seasonal patterns, which one can identify with the help of the Seasonax app on Bloomberg and/ or Thomson-Reuters. Many of them are still completely unknown.

“Sell in May” is a truism people have been aware of for decades. Nevertheless, as the statistics show, the pattern actually continues to work. Apparently far too few investors are actually taking action based on their knowledge of the pattern and there is almost no arbitrage activity trying to take advantage of it. The stability and persistence the pattern has exhibited hitherto suggests that the “sell in May” tactic will continue to work in the future.

Next week we will show you the charts detailing the pattern over time in all the countries we have reviewed.

Sell in May” – sometimes the simple rules are the best!

 

Dimitri Speck specializes in pattern recognition and trading systems development. He is the founder of Seasonax, the company which created the Seasonax app for the Bloomberg and Thomson-Reuters systems. He also publishes the website www.SeasonalCharts.com, which features selected seasonal charts for interested investors free of charge. In his book The Gold Cartel (published by Palgrave Macmillan), Dimitri provides a unique perspective on the history of gold price manipulation, government intervention in markets and the vast credit excesses of recent decades. His ground-breaking work on intraday patterns in gold prices was inter alia used by financial supervisors to gather evidence on the manipulation of the now defunct gold and silver fix method in London. His Stay-C commodities trading strategy won several awards in Europe; it was the best-performing quantitative commodities fund ever listed on a German exchange. For in-depth information on the Seasonax app click here (n.b.: subscriptions through Acting Man qualify for a special discount! Details are available on request).

 

Table by Seasonax

 

Editing, chart and image captions by PT

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Is the Canary in the Gold Mine Coming to Life Again?
      A Chirp from the Deep Level Mines Back in late 2015 and early 2016, we wrote about a leading indicator for gold stocks, namely the sub-sector of marginal - and hence highly leveraged to the gold price - South African gold stocks. Our example du jour at the time was Harmony Gold (HMY) (see “Marginal Producer Takes Off” and “The Canary in the Gold Mine” for the details).   Mining engineer equipped with bio-sensor Photo credit: Hulton Archive   As we write these...
  • Fed Credit and the US Money Supply – The Liquidity Drain Accelerates
      Federal Reserve Credit Contracts Further We last wrote in July about the beginning contraction in outstanding Fed credit, repatriation inflows, reverse repos, and commercial and industrial lending growth, and how the interplay between these drivers has affected the growth rate of the true broad US money supply TMS-2 (the details can be seen here: “The Liquidity Drain Becomes Serious” and “A Scramble for Capital”).   The Fed has clearly changed course under Jerome Powell...
  • Are Credit Spreads Still a Leading Indicator for the Stock Market?
      A Well-Established Tradition Seemingly out of the blue, equities suffered a few bad hair days recently. As regular readers know, we have long argued that one should expect corrections in the form of mini-crashes to strike with very little advance warning, due to issues related to market structure and the unique post “QE” environment. Credit spreads are traditionally a fairly reliable early warning indicator for stocks and the economy (and incidentally for gold as well). Here is a...
  • The Gold Standard: Protector of Individual Liberty and Economic Prosperity
      A Piece of Paper Alone Cannot Secure Liberty The idea of a constitution and/or written legislation to secure individual rights so beloved by conservatives and among many libertarians has proven to be a myth. The US Constitution and all those that have been written and ratified in its wake throughout the world have done little to protect individual liberties or keep a check on State largesse.   Sound money vs. a piece of paper – which is the better guarantor of liberty?...
  • Fed President Kashkari Hears Voices – Are They Lying?
      Orchestrated Larceny The government continues its approach towards full meltdown. The stock market does too. But when it comes down to it, these are mere distractions from the bigger breakdown that is bearing down upon us.   Prosperity imbalance illustrated. The hoi-polloi may be getting restless. [PT]   Average working stiffs have little time or inclination to contemplate gibberish from the Fed. They are too worn out from running in place all day to make much...
  • US Stocks and Bonds Get Clocked in Tandem
      A Surprise Rout in the Bond Market At the time of writing, the stock market is recovering from a fairly steep (by recent standards) intraday sell-off. We have no idea where it will close, but we would argue that even a recovery into the close won't alter the status of today's action – it is a typical warning shot. Here is what makes the sell-off unique:   30 year bond and 10-year note yields have broken out from a lengthy consolidation pattern. This has actually surprised us, as...
  • Switzerland, Model of Freedom & Wealth Moving East – Interviews with Claudio Grass
      Sarah Westall Interviews Claudio Grass Last month our friend Claudio Grass, roving Mises Institute Ambassador and a Switzerland-based investment advisor specializing in precious metals, was interviewed by Sarah Westall for her Business Game Changers channel.   Sarah Westall and Claudio Grass   There are two interviews, both of which are probably of interest to our readers. The first one focuses on Switzerland with its unique, well-developed system of  direct...
  • Exaggerated Economic Growth of the Third World
      Exciting Visions of a Bright Future Fund Managers, economists and politicians agree on the exciting future they see in the Third World. According to them, the engine of the world’s economic growth has moved from the West to what were once the poverty-stricken societies of the Third World. They feel mushy about the rapid increase in the size of the Middle Class in the Third World, and how poverty is becoming history.   GDP of India vs. UK in 2016 – crossing...
  • Choking On the Salt of Debt
      Life After ZIRP Roughly three years ago, after traversing between Los Angeles and San Francisco via the expansive San Joaquin Valley, we penned the article, Salting the Economy to Death.  At the time, the monetary order was approach peak ZIRP.   Our boy ZIRP has passed away. Mr. 2.2% effective has taken his place in the meantime. [PT]   We found the absurdity of zero bound interest rates to have parallels to the absurdity of hundreds upon hundreds of miles of...
  • Why You Should Expect the Unexpected
      End of the Road The confluence of factors that influence market prices are vast and variable.  One moment patterns and relationships are so pronounced you can set a cornerstone by them.  The next moment they vanish like smoke in the wind. One thing that makes trading stocks so confounding is that the buy and sell points appear so obvious in hindsight.  When examining a stock’s price chart over a multi-year duration the wave movements appear to be almost predictable.   The...
  • How Dangerous is the Month of October?
      A Month with a Bad Reputation A certain degree of nervousness tends to suffuse global financial markets when the month of October approaches. The memories of sharp slumps that happened in this month in the past – often wiping out the profits of an entire year in a single day – are apt to induce fear. However, if one disregards outliers such as 1987 or 2008, October generally delivers an acceptable performance.   The road to October... not much happens at first - until it...
  • Yield Curve Compression - Precious Metals Supply and Demand
      Hammering the Spread The price of gold fell nine bucks last week. However, the price of silver shot up 33 cents. Our central planners of credit (i.e., the Fed) raised short-term interest rates, and threatened to do it again in December. Meanwhile, the stock market continues to act as if investors do not understand the concepts of marginal debtor, zombie corporation, and net present value.   The Federal Reserve – carefully inching forward to Bustville   People...

Support Acting Man

Item Guides

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com