John Hussman of Hussman Funds is a unique character in the investment/mutual fund world. He writes weekly on the markets in a clear and interesting manner. As an academic in a prior life he approaches the markets in a precise, quantitative manner. In this piece he examines the research behind a number of seasonal market tendencies. He finds them “interesting.” But, that does not mean he relies heavily on seasonality:
As a result, I never use or act on seasonal patterns in a way that contradicts my conclusions from the analysis of valuations and market action. However, I do allow seasonal considerations to modestly amplify, mute or affect the specific timing of investment actions that I plan to take in any event.
There are a number of reasons why there might be seasonal tendencies in the stock market. We will leave those for another time, but I think Hussman’s approach is a solid one in that it uses seasonality as one variable among many.