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weagle99
Member since Nov 2011
9327 posts

Dow normally dips during the summer?


I was looking through the performance of the market over the past few years and noticed it almost always drops some amount during the May-July timeframe. Is this a recognized phenomenon? Noticing lots of funds at historical highs and want to avoid getting in at the peak if possible / lucky.






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Janky
LSU Fan
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Member since Jun 2011
5802 posts

re: Dow normally dips during the summer?


Yes. May-October is historically weak. Hence the old saying, sell in May and go away.





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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
8706 posts

re: Dow normally dips during the summer?


quote:

I was looking through the performance of the market over the past few years and noticed it almost always drops some amount during the May-July timeframe. Is this a recognized phenomenon? Noticing lots of funds at historical highs and want to avoid getting in at the peak if possible / lucky.





You plan on selling the funds in September? Probably shouldn't invest in mutual funds then. If not, then pay no mind to the "sell in May, then Go away" philosophy, because Timing the market is STUPID, but Time IN the market is the key to long term returns.






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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
8706 posts

re: Dow normally dips during the summer?


quote:

Yes. May-October is historically weak. Hence the old saying, sell in May and go away.




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

Mark Twain






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Janky
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re: Dow normally dips during the summer?


quote:

Vols&Shaft83


You're right. What was I thinking? It just rhymes and sounds good. History has no bearing here. Carry on.






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CamdenTiger
Member since Aug 2009
25862 posts

re: Dow normally dips during the summer?


quote:

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


ISWHDT






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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
8706 posts

re: Dow normally dips during the summer?


quote:

You're right. What was I thinking? It just rhymes and sounds good. History has no bearing here. Carry on.



Great article on this subject here: LINK


Average Annual Return (including dividends) on the S&P from April 1st, 1926- March 31st, 2012 using the strategy:

Sell in May, Buy Back in October 8.4%

Reverse Strategy, Buy in May, sell in October 5.1%

Simple Buy and hold, regardless of season 10%







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Janky
LSU Fan
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Member since Jun 2011
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re: Dow normally dips during the summer?


What are the numbers if you don't get back in for October, but wait for November like I originally posted? Split the year November 1- April 30 vs. may 1- October 30?





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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
8706 posts

re: Dow normally dips during the summer?


quote:

What are the numbers if you don't get back in for October, but wait for November like I originally posted? Split the year November 1- April 30 vs. may 1- October 30?


Too much work.

Those results were based on the last trading day/first trading day of OCT/NOV and April/May, since that varies every year, it's tough to be that specific. We're talking about the difference of a few days, not whole months, so result differences would likely be within < .05% give or take either direction, if even that much.






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Janky
LSU Fan
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re: Dow normally dips during the summer?


quote:

Vols&Shaft83


Yeah, you are probably right.

photo removed






This post was edited on 4/4 at 9:35 am


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weagle99
Member since Nov 2011
9327 posts

re: Dow normally dips during the summer?


quote:

You plan on selling the funds in September? Probably shouldn't invest in mutual funds then. If not, then pay no mind to the "sell in May, then Go away" philosophy, because Timing the market is STUPID, but Time IN the market is the key to long term returns.


Understand that, however most things I am seeing now are at historical highs. I keep picturing some type of correction in the near future based on that and past performance.

I know you can't really time the market, but based on what I am seeing I can envision getting into some of these funds right now and then riding them down during the early summer.

ETA: I'm in the market now, just thinking about making some moves.



This post was edited on 4/3 at 8:42 pm


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Janky
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re: Dow normally dips during the summer?


quote:

weagle99


Here is my strategy. Build a good core portfolio with some balanced funds and a few other holdings that you keep pretty much year round. During the Nov.-April time I add equity ETFs to create that little extra alpha. It is not always perfectly on those dates, but market momentum will tell you. For example, this year past year it didn't really happen until December. I set trailing stops behind them around April and protect my gains. Sometimes I miss a little return, but I rarely take the big hit one must avoid.






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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
8706 posts

re: Dow normally dips during the summer?


quote:

Yeah, you are probably right.





Does that chart account for costs associated with moving in and out of equities and converting to cash/bonds?

Investors selling in May incur taxes on short-term capital gains and higher transaction costs than investors who simply buy-and-hold.

I'm sure that there is a seasonal component to stocks' price appreciation that is inconsistent with efficient markets, but these data aren't enough to judge the efficacy of a seasonal switching strategy.

Long story short, buy and hold is more efficient, less risky, and less work.






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Janky
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re: Dow normally dips during the summer?


quote:

Long story short, buy and hold is more efficient, less risky, and less work.


Yep, you're probably right again with your absolutest statements. Buy and hold is surely the way to go. Damn that seasonality.

photo removed



This post was edited on 4/4 at 9:35 am


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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
8706 posts

re: Dow normally dips during the summer?


quote:

Here is my strategy. Build a good core portfolio with some balanced funds and a few other holdings that you keep pretty much year round. During the Nov.-April time I add equity ETFs to create that little extra alpha. It is not always perfectly on those dates, but market momentum will tell you. For example, this year past year it didn't really happen until December. I set trailing stops behind them around April and protect my gains. Sometimes I miss a little return, but I rarely take the big hit one must avoid.


So essentially we have almost identical strategies, setting a trailing stop does not necessarily mean "Selling in May". You're still holding, with insurance on your profits if the stock takes a "big hit". So why are we arguing?






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LSUcam
LSU Fan
Destin FL
Member since Dec 2011
381 posts

re: Dow normally dips during the summer?


quote:

Vols&Shaft83



You quote practical books. Practical Vols is practical.






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LSUcam
LSU Fan
Destin FL
Member since Dec 2011
381 posts

re: Dow normally dips during the summer?


The idea of seasonal trends is very similar to the idea of other market anomalies (i.e. January Effect).

There is a fundamental flaw with consistently repetitive patters and this is why market timing is a near impossibility:

If there is any real correlation to these so-called patterns then by the time the market has "realized" these effects, then it becomes a part of the efficiency and rational investors eventually dilute any correlation.



quote:

Janky


Although your chart does supports January returns pretty well. I would like to see a 10/20/30 year monthly returns.



This post was edited on 4/3 at 11:10 pm


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matthew25
Ole Miss Fan
Member since Jun 2012
3274 posts

re: Dow normally dips during the summer?


I am enjoying this show. Carry on.





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LSUcam
LSU Fan
Destin FL
Member since Dec 2011
381 posts

re: Dow normally dips during the summer?


Bump

Anyone have anymore thorough historical evidence supporting/denying the correlation of "seasonal trends".

I lean towards saying there isn't a sigificant correlation, but I've been wrong and foolish before.






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yellowhammer2098
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Tuscaloosa, AL
Member since Mar 2013
503 posts

re: Dow normally dips during the summer?









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