Investors have had to withstand a much tougher start to this
year than last. As of early March, U.S. stocks were up or down by
a nominal amount, depending on which benchmark you use.
Meanwhile, Japanese and emerging market stocks' performance has
Some investors looking for a catalyst to move stocks higher in
coming months have pointed to the calendar. The thesis goes that
markets tend to do better in the spring (
think "sell in May and go away"
), and therefore investors should look forward to better
performance as we get into March.
While I believe stocks can move higher, I take issue with the
notion that the spring season is likely to help. Here are three
reasons why I caution investors against putting too much faith in
the influence of the seasons.
So far this year, seasonality has been
Stocks typically rally in January and struggle in February.
This year the pattern has been reversed. The S&P 500
plunged in January, losing more than 3.5%, only to quickly
reverse those losses with a 4% gain in February.
The spring isn't a particularly positive time for
While April does display a positive bias in terms of market
performance, the evidence on March is mixed. Over the past
quarter century, March has indeed been a strong month, with an
average return of more than 1.3% and a median return of nearly
2%. However, over the longer term, the record is less
impressive. Going back to 1927, the average return for the
S&P 500 in March is roughly 0.6%, right in line with the
long-term average. Nor has the market been much more likely to
go up in March than in other months - March's "win rate" is 59%
vs. 56% for all months taken together.
As I've noted in the past, I place less faith in the
calendar than others.
certain months do demonstrate a tendency to be
positive or negative for stocks
, the magnitude of that bias looks less impressive when
compared against the normal variation in returns. In other
words, once you adjust for normal volatility, few, if any,
months demonstrate a statistically significant seasonal bias.
The one exception:
. Over the long term, returns have tended to be unusually
negative during the ninth month of the year. In contrast, the
bias in the spring doesn't look as significant.
For investors there's a clear takeaway: watch the
the market is going to advance this spring
, it will likely be because geopolitical tensions recede and we
see an upturn in the economic data, confirming the thesis that
this winter's weakness was mostly due to
unseasonably bad weather
If we see a stronger economy, stronger guidance from
rates remain relatively low, the market can advance. It's
unlikely, however, that the stocks will push ahead simply because
the calendar turns.
Russ Koesterich, CFA, is the Chief Investment Strategist
for BlackRock and iShares Chief Global Investment Strategist.
He is a regular contributor to
and you can find more of his posts
Source: Bloomberg, BlackRock Research