So what are the top months for stocks?
The above is an interesting question to ponder if you study past and future price action. Some investors think that stocks perform better during certain months of the year.
But is there evidence to the claim, or is it just fantasy?
“ome investors think that stocks perform better during certain months of the year”
WEALTH TRAINING COMPANY
Enter Schroders, a British asset management firm, who decided to conduct their study to prove or disprove the thesis that there are top months for stocks
The data analysis is based on 31 years of performance across four major stock indexes.
FTSE 100: An index of the top 100 companies on the London Stock Exchange (LSE).
MSCI World: An index of over 1,000 large and mid-cap companies within developed markets
S&P 500: An index of the 500 largest companies that trade on U.S. stock exchanges
Eurostoxx 50: An index of the top 50 blue-chip stocks within the Eurozone region.
Below is Schroders finding presented in a table
The percentages in the following table represent the historical frequency of these indexes rising in a given month between the years 1987 and 2018. Months are ordered from best to worst, in descending order.
“Enter Schroders, a British asset management firm, who decided to conduct their study to prove or disprove the thesis that there are top months for stocks”
WEALTH TRAINING COMPANY
| Rank | Month of Year | Frequency of Growth (%) | Difference from Mean (p.p.) | |
| #1 | December | 79.0% | +19.9 | |
| #2 | April | 74.3% | +15.2 | |
| #3 | October | 68.6% | +9.5 | |
| #4 | July | 61.7% | +2.6 | |
| #5 | May | 58.6% | -0.5 | |
| #6 | November | 58.4% | -0.7 | |
| #7 | January | 57.8% | -1.3 | |
| #8 | February | 57.0% | -2.1 | |
| #9 | March | 56.3% | -2.8 | |
| #10 | September | 51.6% | -7.5 | |
| #11 | August | 49.3% | -9.8 | |
| #12 | June | 36.7% | -22.4 | |
| Average | 59.1% | n/a |
“In terms of frequency of growth, December has historically been the best month to own stocks. This lines up with a phenomenon known as the “Santa Claus Rally”, which suggests that equity markets rally over Christmas” – Wealth Training Company
As we can see from the table the top months for stocks tend to be December
In terms of frequency of growth, December has historically been the best month to own stocks. This lines up with a phenomenon known as the “Santa Claus Rally”, which suggests that equity markets rally over Christmas.
April comes second in the top months for stocks. One theory is that many investors receive their tax refunds in April, which they then use to buy stocks. The resulting influx of cash pushes prices higher.
The worst month is June, then August and September.
But here is the Caveat to Schroders data which analysis top months for stocks;
December 2018 was the worst month for stocks since the Great Depression with stocks falling more than 8% due to central bank tightening.
June, the current month we are in, should be the worst month, according to records.
So why has there been a boom in insiders buying their stocks?
Looking at the data to predict the future is akin to driving your car, looking solely in the rear mirror and disregarding the road ahead. We prefer capital flows as a forward price indicator.
So Inside buyers are not investing according to top months for stock analysis.
Think about it. Insider buying is surging.
