Buy On 1 November For A SAD Gain!
Since 1990, the UK market has:
- Risen an average 7.4% between 1 November and 30 April.
- Risen an average 0.9% between 1 May and 31 October.
One factor here is the Northern hemisphere trading bias towards the winter months due to Christmas. Another less logical one is Seasonal Affective Disorder (SAD) depressing the mood of investors at the end of summer and start of autumn. The evidence for this explanation is that Southern hemisphere markets such as Australia do better between May and October.
But who cares what the explanation is! It works!
How likely is it that 2013 will follow the pattern?
In my view this is very likely:
- The only year of failure for this strategy in recent years was 2008 when all kinds of mayhem were running amok in markets.
- The Federal Reserve is committed to pumping further money into the system.
- Economic data from the major economies, other than India, has been very good recently.
- All the key markets are in well established uptrends without showing signs of being overbought.
My strategy is simple – having been cagey for the past five months, I have started buying chunks of selected stocks and will continue this until early November.
There is a 90% chance that a market investment made on 1 November will beat one made on 1 May.
Anyone considering investing in the markets would, in my view, be nuts to delay until April or May.
Thursday 10 October 2013