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Wall Street History
https://www.gofundme.com/s3h2w8
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04/15/2005
Seasonality Play
It’s time to update one of the more powerful principles of
investing in the stock market, at least using history as our guide.
Back in 1986, Yale Hirsch discovered that if you invest only
during the November 1 – April 30 stretch, over time you will
have far more success than investing in the corresponding period,
May 1 – October 31. And it’s not even close. Specifically:
$10,000 invested in the Dow Jones on May 1, 1950, and then
compounded every May – October period thereafter (switching
to fixed income for the other six months) would have resulted in
a figure of just $9,682 or a $318 loss by Oct. 31, 2003.
Conversely, $10,000 first invested on November 1, 1950, and
then compounded each November – April (again, switching into
fixed income the other six months) would have grown to
$492,060 or a net gain of $482,060 by April 30, 2004.
*These returns do NOT include dividends.
[For the S&P 500 the net results were $7,102 and $349,165,
respectively.]
What’s interesting is that during the May – October period there
has never been a 20% gain, while there have been nine, 20%+
gains November – April. You can see through the power of
compounding the impact these numbers can have. On the
negative side there have been ten, 10%+ losses May – October
with only two such declines November – April.
So it should then be no surprise that for both the Dow and S&P
five of the best six months fall in the November – April time
period.
Monthly returns for the Dow Jones, Jan. 1950 – June 2004
November . 1.6% average percentage change
December . 1.8%
January . 1.4%
February ... 0.2%
March ... 1.0%
April . 1.9%
May ... 0.1%
June .. -0.1%
July 1.1%
August .. -0.1%
September . -1.1%
October ... 0.6%
Monthly returns for the S&P 500 (same period)
November ... 1.7%
December 1.7%
January 1.5%
February . -0.1%
March .. 1.0%
April 1.3%
May . 0.3%
June . 0.2%
July .. 0.9%
August . 0.02% [fractionally positive]
September .. -0.7%
October 0.9%
And for the record, monthly returns for Nasdaq (1/1/71-6/30/04)
November 1.9%
December 2.1%
January 3.9%
February .. 0.6%
March .. 0.3%
April 1.2%
May . 1.0%
June . 1.3%
July -0.2%
August . 0.3%
September .. -1.1%
October .. 0.5%
*While I wouldn’t put too much weight into the Nasdaq figures
because the history is two decades shorter and some monster
negative months skew the returns a bit, the numbers do
graphically illustrate the old adage that when investing in tech,
July – October is historically weak while November – January is
strong.
Source: “Stock Treader’s Almanac: 2005” Yale Hirsch &
Jeffrey A. Hirsch
Next Wall Street History April 22.
Brian Trumbore
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