• Seasonality Issues

    Articles have appeared on the web stating that we are entering into a weak seasonal period for the markets, so I decided to pull together some quick research related to seasonality.

    In the 20 years leading up to 2009, July to October indeed showed weak seasonality.



    This also seemed to be the case between 1990 and 2016. But what about the period between 2009 and 2016, which corresponds to central bank interventions?



    Everyone should know the answer: central banks have killed seasonality along with volatility. There is no such a thing as a poor time to buy stocks any more.

    This is true for the S&P500, which shows a rather flat July-October pattern.
    As a side story, we can see that year-to-date in 2017, the S&P500 has outperformed the average of past central bank intervention years. It could be a sign that the Trump trade has provided even more upside than what an average central bank intervention would offer.



    Comparatively, IWM in 2017 is in line with past gains. However, August has been negative since 2009, but the end of the year has compensated for a weak August.



    For the QQQ, we can see that since 2009, there has been a constant and regular price gain, without any detectable seasonality. The most salient feature here is that in 2017, the QQQ has already greatly outperformed the average of past years.



    Conclusions:

    Seasonality could be elusive when what matters are central banks.

    What this study shows is that both QQQ and SPY have outperformed their past average price gains at this time of the year.

    The question is why? I will need more time to study the reasons and what this implies.