Skip to main content

Sound Advice: June 24, 2026

What is the seasonal pattern for stock market performance?

 A widely cited seasonal pattern is that stocks tend to be stronger from November through April and weaker from May through October.  The pattern is often summarized as “sell in May and go away,” though it is a tendency, not a rule.

Typical seasonal pattern

  • Stronger months: November, December, January, March, April, and often October.
  • Weaker months: May through September, with September often standing out as especially weak.
  • Year-end strength: November and December frequently benefit from improved sentiment and the “Santa Claus rally” effect.

Why it may happen

Seasonality is usually linked to recurring behavior rather than a single cause: holiday spending, portfolio rebalancing, tax-loss selling, earnings timing, and lighter summer trading volumes.  Some analysts also note that January can be helped by new flows into the market and small-cap effects.

Important caveat

Seasonal patterns are historical averages, not dependable predictions for any given year. A strong macro shock, Fed policy change or earnings cycle can overwhelm seasonality in a hurry.

Practical use

Investors usually treat seasonality as a context tool, not a standalone timing system.  It can be most useful when it lines up with valuation, earnings trends, and market breadth rather than being used by itself.

How reliable are seasonal patterns over long term

Seasonal stock-market patterns are modestly reliable at best over long periods, but they are not stable enough to use as a standalone timing system.  The broad tendencies can persist in aggregate, yet the size, timing, and even direction of the effect can change across decades.

What holds up

  • The “best six months” effect and the weaker May-to-October stretch have shown up in many historical studies, so the pattern is not random noise.
  • Calendar effects like turn-of-the-month, year-end strength, and the January effect have also appeared repeatedly in back tests.
  • These effects can be useful as a contextual filter, especially when other indicators point the same way.

Why reliability is limited

  • Markets adapt, so once an anomaly becomes widely known, it often gets weaker or changes shape.
  • Macro shocks, recessions, inflation spikes, earnings surprises, and Fed policy can overwhelm any seasonal tendency.
  • Some seasonal effects are concentrated in certain regimes, asset classes or decades rather than being universally durable.

How to think about it

A good rule is that seasonal patterns are usually directional edges, not predictive signals.  They may slightly improve odds, but they do not tell you what the market will do in a given year.

Practical takeaway

For investing, seasonality is best used as one input among several: valuation, trend, earnings, breadth, and liquidity.

  

Comments

Post a Comment

Popular posts from this blog

Sound Advice: July 16, 2025

Fixed annuities are poor investments Fixed annuities are often criticized as poor investments for several reasons, despite their reputation for providing stable, predictable income.  Here are the key drawbacks and concerns:   High Fees and Commissions Internal Fees:  Fixed annuities can carry a range of fees, including administrative charges, mortality expense risk fees, and rider fees. These can add up to 2%–4% per year, significantly eroding returns over time. Commissions:  Sales agents and financial advisors often receive high commissions for selling annuities—sometimes as much as 5%–8% of the invested amount. This creates a financial incentive for advisers to recommend them, even when they may not be the best fit for the client. Comparison to Other Investments:  Mutual funds and ETFs typically have much lower fees and commissions, making them more cost-effective for long-term growth. Limited Growth a...
Post a Comment
Read more

Sound Advice: October 8, 2025

How many investors have outperformed the stock market over the last 20 years? Very few investors have outperformed the stock market over the past 20 years.   Data shows that only about 6% to 8% of actively managed equity funds in the U.S. beat the market over this period, with the vast majority—over 90%—underperforming the S&P 500 or equivalent broad indexes. Percentage of Investors Beating the Market Only 8% of equity funds investing in large companies managed to outperform the market over a recent 20-year span. About 94% of all domestic funds underperformed the S&P 1500 Composite Index from 2005-2024. Over shorter timeframes (5-10 years), typically fewer than 15-20% of fund managers beat the S&P 500, and performance persistence is rare. Why It Is Rare The S&P 500’s high returns have proven immensely difficult to beat, especially as indexing has become popular and markets have ...
Post a Comment
Read more

Sound Advice: January 15, 2025

Why investors shouldn't pay attention to Wall Street forecasts   Investors shouldn't pay attention to Wall Street forecasts for several compelling reasons: Poor accuracy Wall Street forecasts have a terrible track record of accuracy. Studies show that their predictions are often no better than random chance, with accuracy rates as low as 47%   Some prominent analysts even perform worse, with accuracy ratings as low as 35% Consistent overestimation Analysts consistently overestimate earnings growth, predicting 10-12%                 annual growth when the reality is closer to 6%.   This overoptimism can                 lead investors to make overly aggressive bets in the market. Inability to predict unpredictable events The stock market is influenced by numerous unpredictable factors, including geopolitical events, technological changes, and company-specific news.   Anal...
Post a Comment
Read more