Market Musings 040323:
A Return to Supportive Seaonality
Summary
Seasonality is about to flip positive for key stock indices
Biased towards European stocks
Sectors: cyclical exposure has strongest seasonal effect
Mid and small caps also favoured
Crude oil has a strong seasonal bias for next few months
Super Seasonality about to start
From the middle of March, seasonality turne positive from stock markets, led by the US.
S&P 500 index performs well traditionally from mid-March
Source: equityclock.com
From March 12, stocks typically go up in the US until mid-September, on average. While one can never completely rely on seasonal effects,
these effects have been remarkably persistent over the long term.
The DAX index has typically gained nearly 7% from mid-March to the end of July over the last 20 years, while FTSE 100 seasonality has been positive until end-April (the classic Halloween effect).
DAX index: bullish seasonality continues until end-July
Favour Cyclical sectors: Oil & Gas, Materials, Industrials
The next few months favour cyclical sectors in terms of seasonal effects - with Oil & Gas, Materials and Industrials all in focus.
Oil exploration & production sector
Following crude oil seasonality
Also a pronounced small-cap effect, at least in the US
US small caps enter a favourable seasonal period now until mid-September.
US small caps hit their sweet spot from March
UK Mid Caps generally perform well over January-May
Have a great week ahead
Edmund
