Seasonality Portfolio

Introduction:

Over the last 73 years recurring patterns have emerged regarding stock market performance over the course of a calendar year. For various reasons, certain periods throughout the year have been unkind to investors. For instance, over the last 73 years, the average return for the month of September was negative .85%. If the stock market has averaged 9% per year, then an average month should be positive

.75%. Other months like April and

November have both averaged over positive 1.4%.*

It is unclear why certain times of the year have been historically unfavorable times to invest. It could be related to times of the year we pay income taxes, when workers traditionally receive bonuses, celebrate holidays, or go on vacation. Many have speculated about the cause of these recurring patterns, but the exact reasons are unknown.

Our team at Singer Wealth has developed the Seasonality Model portfolio based on these patterns. Taking advantage of these trends in the financial markets, we backtested the potential outcomes if a portfolio had been in cash on the same bad days throughout the last 20 years, ending on December 31, 2023. Our findings were remarkable.

The backtested results showed a portfolio’s potential return in the S&P 500 averaged 7.6% per year; whereas, if the portfolio had gone to cash for the same historically lower days each year, the returns averaged 12.5% per year. In our testing, $100,000 invested in the S&P 500 could have grown to about $429,500 after 20 years versus $1,045,000 for the portfolio. The backtested returns assume no reinvestment of dividends or interest while in cash. If the cash had earned 4-5% per year that would have raised hypothetical returns by 1.25-1.5% per year.