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One of the coolest and simplest band names of all time belonged to the "British Invasion" band called The Zombies.
Since the zombie horror subgenre has exploded in popularity in recent years, I'm sure there have been many an upstart band that would "die" to have that name…
If you don't remember the band by its name, there's a good chance that most of you will remember one of their catchy songs.
Both "She's Not There" and "Tell Her No" were top 10 hits in the United States during 1964. Both were hummable tunes steeped in that classic mid-60s British Invasion sound.
But our title today comes from the band's most well-known hit, "Time of the Season."
The song, according to band members, was the last one written for what would be the band's breakup album.
In fact, the band did break up in the time between recording the album in 1967 and when it was finally released in 1969.
In contrast to their earlier work, this song (and indeed, the whole album) had a more modern psychedelic feel.
The haunting opening baseline punctuated by hand claps and the breathy "ahhh" vocal are instantly recognizable today.
Because the band was not able to support the album's release, it had only modest success in the United States (and was basically a flop back home in the UK).
But despite the lack of support, the evocative tune reached No. 3 on the U.S. Billboard charts and No. 1 on the U.S. Cashbox magazine charts.
And as icing on the cake, the album "Odessey and Oracle" (the album title was misspelled by the graphic artist and kept) continues to inspire critical acclaim. Rolling Stone magazine lists the album as No. 100 in its "500 Greatest Albums of All Time" list.
Why the rock 'n' roll history lesson?
When I started to write today's article about an amazingly strong and profitable seasonal tendency in the stock market, that evocative opening lyric kept popping into my head: "It's the time of the season when love runs high…"
And it is indeed the time of the season when profits run high. Let me show you why…
Why We've Got Our Eye on This Seasonal Trend
People have always done things differently at different times of the year.
- Around the New Year, there are many more gym memberships and Weight Watchers signups than any other time.
- Back-to-school season sees an uptick in clothes and electronic sales.
- The Christmas and Hanukkah season leads to a big retail sales increase driven by the gift-giving tradition.
So it's little wonder that the stock market has its own seasonal trends.
And I want to share one of my favorites with you today that goes by at least three different names…
- The Halloween Indicator
- The Best Six Months
- Sell in May and Go Away
This seasonal tendency holds that stocks offer their best returns during the Halloween through April period.
You can see from that simple description how all three of the monikers above are derived.
The Best Six Months name is pretty clear.
And the fact that it starts at the end of October easily explains "The Halloween Indicator" nickname.
This tendency is also the origin of the Wall Street adage, "sell in May and go away" – meaning to be out of the markets in the six worst months.
But what does this stock market anomaly mean for us here at The 10-Minute Millionaire?
As with many things here – the big deal is profits. This is a seasonal trend that has consistently churned out oversized returns for centuries.
Since the start of the 21st century, there have been just three years (2000, 2007, and 2008) where the Best Six Months did not live up to its historical standard. And it's important to note that those years marked the burst of the tech bubble and the great recession.
If you're skeptical about the validity of this seasonal tendency, let me show you a truly striking chart.
The folks at Chart of the Day produced this graphic that shows the gains made during the Best Six Months compared with those made from May to October:
The very thin grey line on top represents the total returns of the market since 1950. The dark blue line just below it shows returns made just in the November-April time frame.
The dark green line at the bottom is the return for being in the market only during the worst six months of every year, from May to October.
The difference is compelling. I might even call it stunning.
The Best Six Months has a researched history dating back to 1694. It has shown a statistically significant effect in every stock market that has been investigated by peer-reviewed papers (with the lone exception of a small island country in the Indian Ocean).
Some pundits have written, with a shorter-term data set, that while the Best Six Months has worked over the past few years, note that the period between May and October has also been strong (like this year).
I've crunched new numbers for you and despite one of the strongest, and longest, bull markets of this century (since March 2009), I'm happy to report that the Best Six Months indicator still holds true.
In fact, the "Worst Six Months" vastly underperformed in the following years:
- 2010 (-0.3% versus +15.2%)
- 2011 (-8.1% versus +11.5%)
- 2012 (+1.0% versus +13.1%)
- 2016 (+2.9% versus +12.1%)
That's four out of eight years in a strong bull market – dang this thing is good!
While this seasonality doesn't work every single time, it has continued to work, and to work well.
And in the competitive world of stock investing and trading, every proven edge that we can get is helpful.
When Two Worlds Collide
When we lay out our plan of attack now that the Best Six Months indicator is in effect, we have to factor in this year's unique market catalyst.
There's one thing hanging over the markets that – combined with the return of seasonal volatility – could drive volatility higher than it's been since the 2008 financial crisis.
And it's courtesy of the biggest "force multiplier" in the markets…
About the Author
Nationally recognized technical trader. Background in engineering, system designs, and risk reduction. 26 years in the markets.