Why Seasonality Is a Feather in the Bull’s Cap

As we noted earlier this week, the strongest two months of the year over the past 10 years are right now: March and April.

Taking another look at seasonality shows the S&P 500 historically tends to form a low in early March before a nice surge into early May. Although the bottom this year potentially occurred a little bit earlier, in the middle of February, from a seasonal point of view, history still favors the bulls in the next few months.

The Average Year for the S&P 500 Since 1950 Tends to Bottom Now
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Source:  LPL Research, FactSet 03/03/16

 

Now here’s where things get interesting. For the past 10 years, early weakness is nothing new. In fact, January has been lower each of the past three years, with losses of 3.5%, 3.1%, and 5%, respectively. February was slightly negative this year, but in the two previous years it did bounce back, with gains of 4.3% and 5.5%. Then again, considering February this year was down as much as 6.7% at its lows, the reversal to end nearly flat could be viewed as just as impressive.

The chart below shows the average S&P 500 moves over the past 10 years, during which early March has marked the low of the year, before a nice rally.

Early Weakness Is Nothing New for the Past Decade

 030416_blog-figure_2
Source: LPL Research, FactSet  03/03/16

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Past performance is no guarantee of future results.

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