Saturday, January 22, 2011

Seasonal Patterns Are Favorable for the Market

Last time I promised to say more about seasonal patterns, as pointed out by further articles from Alpha Investment Management.

I've written about seasonal tendencies before, for instance here. At that time we were headed into the historically worst part of the 4-year election cycle for stocks, on average. Well, now the situation is reversed.

As explained in the Experts and Human Nature article, we're in the best six months of the year (November through May). Combine that with political considerations, and it turns out we're in the early stages of the best 15 months of the 4-year election cycle. That favorable period consists of the 4th quarter of last year, and all this year, as discussed in The Next 10 Years.

Again, all seasonal patterns are "on average," and any year can vary. (In particular, indications are likely that over the last 3 days, we have already started a correction, of unknown duration.) Seasonality is not a guarantee the market will go up for the entire year, but it makes it more likely. Any given cycle can vary, but over time, this is the pattern.

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