Quick Bites | Let’s hope for a year-end rally

Seasonality analysis is interesting because it looks not at the fundamentals of company earnings, balance sheets and so on, but at the historical patterns which markets tend to follow. Whether it makes sense or not, the prevalence of seasonal patterns is often quite a useful indicator.

In the graphic below, we show the Dow 30’s (DJIA) average percentage change by month over the last 100, 50, and 20 years.  As you can see, September is the only month that has seen the Dow average decline over all three time frames.  September has historically been the most volatile and weakest month of the year for the US stock market.  Over the last 100 years, the Dow has only been positive in September 40% of the time.  No other month has been negative more than it has been positive.

Fortunately, once we get past September, seasonality turns much more positive.  Over the last 20 years, the Dow has averaged a gain of 1% or more in each of October, November, and December. The Australian share market often tends to follow the US.

Source: Bespoke Investment Group



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