While the period from November to April is traditionally recognized as the peak season for equity purchases, veteran investor Jim Paulsen argues that current lagging indicators suggest this pattern may not apply to the current market cycle. In his analysis, Paulsen contended that relying on historical seasonal trends could be misleading given present economic conditions.
To validate his perspective, Paulsen backtested his investment model using data stretching back to 1970. The results of this retrospective analysis indicated that if the model had been applied during that entire timeframe, the returns would have been rather meagre, challenging the conventional wisdom surrounding the ‘best buying season’ for stocks.
Relying on gut feeling based on old charts is risky. Good to see someone questioning the conventional wisdom.
Does the data account for the current inflation environment? The 1970s backtest might not apply here.
History doesn’t repeat, but it often rhymes. Still, I’ll be cautious before moving my portfolio this winter.
I always thought November to April was the golden window. This is actually surprising news for seasonal traders.