Real World  |  FEB 1997

The Stock Market and Seasonality by Bob Kargenian, C.M.T.

The Stock Market and Seasonality by Bob Kargenian, C.M.T. Is there a message that can be gleaned from the performance of the stock market during the 1996 election year? There may be. In 1990, this writer discussed the seasonal movement of the stock market. Here, he updates that work with further research, looking at market activity during the election year. Is there a message that can be conveyed from the stock market’s performance during the 1996 election year? There may be — if you believe in the seasonal and cyclical nature of the market. While not implying that past performance indicates future results, the seasonal aspect of the stock market has been popularized and researched by the likes of Ned Davis, Norm Fosback, Yale Hirsch, Arthur Merrill and Marty Zweig. Research has focused on the performance by month, the performance prior to major holidays, the end of the month effect, the Presidential election cycle and the January effect, among other things. In combination with seasonal influences, for example, the decennial cycle has added some interesting implications. The decennial cycle simply represents the performance of the stock market in each year ending with the same digit (examples include 1905, 1915, 1925 and 1935). The concept was first written about by Edgar Lawrence Smith in Common Stocks and Business Cycles. Until the advent of mutual fund switching in the mid-1970s and stock index futures in 1982, there was no practical or cost-efficient way to take advantage of these patterns or tendencies. That, of course, has changed.

by Bob Kargenian, C.M.T.