Investors and traders follow various investment themes and concepts. Some prefer trading in and out on a daily, weekly or monthly basis. Some investors prefer more long term – looking at investment horizon in years and decades. There is also a middle ground, where traders/investors use a season as a horizon – aptly termed seasonal investing. Some investors consciously subscribe to this method and pursue this form of investing, while some investors follow it subconsciously. The latter form is driven more by the media than any other method. Right on cue, the media starts focusing on certain industries and sectors during certain parts of the season – for e.g., oil & energy during summer months, utilities during winter months etc. For most sectors, there is off and on-season and this article explores them in more detail. Note that this is not the same as cyclical or non-cyclical sectors of the economy.
When it comes to seasonal investing, there are some common concepts people follow – although the validity of such concepts has been questioned more recently. For e.g., a common theme that has been followed for many years is Sell-in-May-and-Go-Away, which suggested that investors can get better returns if they stay invested only between October and May. This was suggested based on the fact that markets was fairly depressed during the summer months when people preferred being outdoors enjoying the good weather. However, we have seen that this is not necessarily true over the last few years. Investors who sold in May missed out on a great rally during the summer months in the yesteryears. The reason is quite unknown – although I suspect either the presence of QE or increased buybacks from companies. The other reason I suspect is the access to technology and the stockmarkets. With the advancements in cellular technology, investors are now able to access and stay on top of the markets anytime anywhere.