With the calendar about to change from October to November, the market will enter its “Best 6 Months”. The “Best 6 Months” tendency was first published by Yale Hirsch, founder of the Stock Trader’s Almanac, in 1986. The concept behind the “Best 6 Months” is simple. Hirsch’s research suggests that over the last several decades the market has made a massive portion of its gains between November and April. And during the remaining 6 months, it has generally struggled to make headway. I’ll also note that since publishing the tendency many years ago, the edge has persisted, with the “Best 6 Months” continuing to outperform the “Worst 6 Months”.
Another bit of good news is that the market is shifting into the 3rd year of the Presidential cycle. At Quantifiable Edges I measure the Presidential Cycle years from November – October rather than January – December. That allows the cycle years to better match up with the elections, which take place in early November. And while the elections are always during the 1st week of November, I always start the cycle year on November 1st. This makes for easy evaluation when combining it with the “Best 6 Months” cycles. In general, the 3rd year of the Presidential Cycle has been a strong one.
When the Best 6 Months and the 3rd Year of the Presidential Cycle have been active at the same time, the results since 1950 have been outstanding. In the table below I have listed out each instance.
All 19 instances since 1950 have shown gains. Of course there have been drawdowns along the way. The 1974-75 period saw SPX pull back 13.2% from its October closing price before rebounding and finishing April 18.1% above the October closing price. And in 2018-2019 there was a 13.5% drawdown from the October close before finishing April 8.6% above it. But overall the stats have been incredibly lopsided. The average full 6-month period saw a net gain of 14.79% and a median gain of 15.24%. Long-term seasonality does not get any better.
Much more information on these indicators and others can be found in the Quantifiable Edges Market Dynamics course. While that course can be purchased on its own, it is also available free with any annual gold subscription to Quantifiable Edges.
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