Seasonality of markets is something I’ve done a lot of work on throughout my career. As humans who are part of society, we behave differently depending on the seasons. We dress differently, we hang out with different people, we go to different places, all according to a calendar.
If you think those behavior changes don’t impact our decision making, then I don’t think you understand humans. And if you think those behaviors and decisions don’t affect how we participate in markets, then I think you’re just being naïve.
I encourage you to pick up a copy of the annual Stock Traders Almanac published by my pal Jeff Hirsch.
Yesterday after the close, I had a great chat with Ed Clissold, the Chief U.S. Strategist at Ned Davis Research. The podcast episode will be up shortly, so keep an eye out for it. You can subscribe to my Technical Analysis Radio Podcast here, if you haven’t already.
One of the things we discussed was the S&P500 Cycle Composite for 2021. In this chart, we’re looking at a composite of the annual seasonal cycle, the decennial cycle and the presidential cycle:
What I like about this is that it incorporates 3 major cycles. It includes every year since 1928, all the Post-Election Years, and every year ending in 1.
As you can see in the chart, the seasonal headwinds are here.
Will the markets care?
Does the S&P500 sell off next month and struggle into the rest of the year?
Would love to hear your thoughts!