Connect with us


Are financial markets seasonal?



PHUKET: There is a lot of confusion over whether it is possible to time to the markets. If you are speculating, or trading, you rely on technical analysis of some sort and do, in fact, time the market. As an investor on the other hand, you should look at underlying fundamentals and attempt to make a purchase when it represents value as a stand-alone investment or contributes to desirable attributes when looked at from a portfolio perspective. That said, there is a statistically significant seasonal tendency which has been well documented and has produced great results in real time.

Sy Harding has been writing a newsletter making real-time calls based on his seasonal timing strategy since 1990. He has had impressive performance and done much better than a buy and hold strategy. The question is though, is this luck or will this be repeated in the coming 25 years as well? If you look into the statistics behind his strategy, the answer is that it likely will. The caveat is that it also may not, and a little explanation of statistics and game theory may help understand why.

Over the last 15 years, the strategy has returned 271.5% compared to the 147.8% return obtained by buying the DJIA (Dow) and holding onto it, while simultaneously missing the crashes of the dot com bubble and the financial crisis of 2008. This makes the strategy look bullet-proof, but in statistics we rely on the law of large numbers to achieve results close to statistically significant averages. The next 25 years is a relatively small sample size, and so deviation from the longer term historical averages could easily occur. Deviations often occur in runs as well, meaning that there may be a bunch of years close together where the normal relationship fails to hold. Anyone who has played roulette knows how the wheel can put up an extremely long run of black or red as soon as you start betting against it.

On the other hand, there are very good explanations why the phenomenon behind the old Wall Street adage of “sell in May and go away” normally holds. For one, many traders take holidays over the summer and the lack of volume often leads to negative reversals (a lack of volume behind an advance is often interpreted by technical traders as a sign of weakness).

There is also good reason why December and January are good months on average. Many fund managers buy stocks that have performed well over the year to be able to show on their annual statements that they are holding them. This is known as window dressing and the increase in volume has the opposite interpretation by technical traders as the one mentioned above. Also, most employees receive their annual bonuses in the beginning of the year and inevitably some of this finds its way into the markets.

On any given year or over a short number of years this strategy may not work, but in the long run the seasonal timing strategy is one of the few that actually stand up to statistical measure. Anybody can easily duplicate Sy Harding’s strategy on their own via a discount broker and the ETF with the symbol “DIA”, which represents a low cost basket of the stocks that make up the Dow. The activity requires strict discipline however, so if you find that you are not able to stick to it 100%, then you will be better off with a buy and hold strategy or dollar cost averaging.

David Mayes MBA lives in Phuket and provides wealth management services to expatriates throughout South East Asia, focusing on UK pension transfers. He can be reached at 085-335 8573 or Faramond UK is regulated by the FCA and provides advice on taxation and pensions.

— David Mayes


Get more from The Thaiger

Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Follow Thaiger by email:

World25 mins ago

Kanye West’s “White Lives Matter” shirt at Paris Fashion Week

Thailand1 hour ago

Tangmo defendant repays vow with 5-metre Ultraman figure

Bangkok2 hours ago

Bangkok asks companies to let employees work from home until October 7

Thailand2 hours ago

Thailand News Today | Prime minister’s achievements since coming back to the office

Best of2 hours ago

Revealed: the best rooftop bars in the world

Thailand2 hours ago

Father & 2 year old son shot in Chiang Mai

Join the conversation on the Thaiger Talk forums today!
Pattaya2 hours ago

Officials predict over 100,000 people at Pattaya International Fireworks Festival

Thailand2 hours ago

Six-legged golden frog brings good fortune in northern Thailand

Tourism2 hours ago

Saii Laguna Phuket to hold a conference on tourism safety and security

Thailand2 hours ago

Mother seeks justice after a monk slapped her son

Expats3 hours ago

Bangkok ranked one of top 5 expat cities

Thailand3 hours ago

Woman abandons home after police ignore four burglaries

Thailand3 hours ago

VIDEO: Brave citizens save delivery driver swept away by floods in northeast Thailand

Chiang Mai4 hours ago

Chiang Mai wakes up to a flooded city district

World4 hours ago

Japanese warned to take cover over North Korea missile test

Thailand1 year ago

Morning Top Stories Thailand | Police to end protests, Human Trafficking | September 14

Thailand2 years ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism2 years ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket2 years ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism2 years ago

Phuket Thai food treats you need to try | VIDEO

Thailand2 years ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism2 years ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand2 years ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand2 years ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand2 years ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand2 years ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand2 years ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand2 years ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand2 years ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand2 years ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11