Stock market climate
Many investors believe that the stock market will perform better at certain times of the year. Is there any truth in these claims or is it just superstition? By a British property management company called Schroeder Data collected Based on that you can easily find some seasonal patterns.
The analysis is based on the 31 year performance of four major stock indices:
- FTSE 100: The London Stock Exchange (LSE) is the index of the 100 largest companies.
- MSCI World: The index of more than 1,000 large and medium-sized companies in developed markets.
- S&P 500: Index of the 500 Largest Companies in the US Stock Exchange.
- Eurostocks 50: Index of the 50 largest blue chip stocks in the euro area.
The percentages in the table below show how often these indices rose in a particular month between 1987 and 2018. So, if there is a 50 percent value somewhere, the stock markets closed with a multiplier that fell that month.
By averaging the above percentages, we get it during the study period
The stock markets closed with a positive monthly performance in 59.1 percent of cases.
The chart below shows how many percentage points of the frequency increase increase in a given month deviated from this 59.1 percent average.
So if you look at the month when stock markets often rise, it is clear
December is the best month for stock markets based on historical data.
It fits “Santa’s Rally” The phenomenon known as stock markets usually rises around Christmas.
One theory is that the holiday season has a psychological impact on investors and encourages them to buy rather than sell. We can also assume that many institutional investors are on leave during this period. This can give more influence to retail investors who are confident about the direction of the market.
The second best month is April. The implicit good performance here is that many investors will receive a tax deduction in April, after which they will spend to buy stocks, and the money flowing into the market will raise exchange rates.
If we talk about higher exchange rates, we can see this trend in terms of yield as well. Focusing on the S&P 500 index, looking at 1928, April saw an average rise of 0.88 percent, well above the overall monthly average of 0.47 percent.
According to data, the three worst months for stocks are June, August and September. Would it be a coincidence that two of these fall in the summer? In addition, we have moved to June.
One explanation for the relative weakness of the season is that corporate traders are on holiday as much as December. However, without the festive mood, the sentiment of the capital market is not very positive and there is more risk as the liquidity is reduced, which is why investors may be cautious.
Believe it or not, the data shows a clear pattern. This is not a coincidence “Sell in May” Expression.
Thoughts to close
It should be noted that these data are based on historical conclusions, which means that they do not guarantee future performance.
Conflicts such as the epidemic of 2020 or the war in Ukraine that erupted this year could have a profound impact on the world and the market as a whole. In such cases the performance of the stock markets may differ significantly from the historical averages shown above.
Cover image: Getty Images