Market Musings 040323: A Return to Supportive Seaonality

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