Calendar & Trends

Many participants of the stock-market, in general pretty rational fellows, are paying a great deal of attention to seasonal or calendar trends.

One of the best known trading adage is appearing each year towards the end of April:

‘Sell in May and go away’ followed by
• ‘Remember to come back in September‘.

The rationale behind is to avoid the more volatile and thereby riskier summer months, when volume, especially in August, is lower than usual.

A seasonal trend that’s the talk of the town in December is the ‘Santa Claus Rally’ with rising stock prices in the week between Christmas and Revelion. Explanations for this seasonal happening reach from tax-related transactions to people investing their Christmas bonuses.

While Santa returns to the arctic circle, there is already the next seasonal anomaly to consider – the ‘January-Effect’. In the first month of the year, shares of small companies (small caps) should outperform the big names (large caps).

Besides, all year long, investors should be aware of Mondays.

We have for instance ‘Merger-Monday‘. The start of the week is typically the day, big mergers are announced, who could lift the stocks of a whole sector. Why Monday? Mergers usually were finalized over a weekend when markets are closed, to reduce the risk of insider-trading and to have plenty of time to polish the considerable legal-framework as well as the press-statements about the merger

Watch out for the ‘Weekend Effect‘.
In volatile market stages, institutional investors often close positions on Friday before the markets close, thereby sending the indexes lower and reenter the market Monday morning, boosting the index level. This is to reduce exposure in unsecure times while markets are closed and not to recommend to fee-paying private investors.

And finally, 2016 is an election year in the US. On average over the last decades, stocks gained 8% the year an US-President was elected.

Well, I personally do not pay too much attention to calendar trends as described. But I am aware that if a great number of investors do otherwise and follow this trends, it can very well become a self-fulfilling prophecy and makes the belief in this seasonal anomalies even greater.

I follow only one advise about seasonal investing, the great writer Mark Twain (1835-1910) gave more than 100 years ago and is valid ever since:

• ‘October: This is one of the peculiarly dangerous months to speculate in stocks in. The other are July, January, September, April, November, May, March, June, December, August, and February’.

When you think, money is the most important thing to start investing, your wrong. What really is required from any investor – read it in the next chapter:

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