The Air Conditioning Is Broken, So Sell Stocks, Buy Bonds

Were you looking for an excuse to move out of nosebleed equities and into something (relatively) safer?

Do your eyes glaze over when people like us try to bore you with all kinds of annoying “analysis”?

Do you long for an idiot-proof rationale for changing your asset allocation but don’t want to be the guy who has to admit later that your decision was based on some arbitrary “trend” lines the market equivalent of a tarot card reader drew on a chart?

Well then “seasonal” trends are for you.

Here’s SocGen’s Andrew Lapthorne.

Via SocGen

With summer fast approaching in the UK (we know this as our office air conditioning has broken down), we discussed seasonality last week with an ex-colleague and now client. There is a wealth of interesting research out there discussing and documenting seasonal trends and market moods. Sandrine Ungari on the SG Cross Asset Quant team pointed us to a paper inferring that SAD financial analysts could be at fault, and of course as is commonplace these days you can even buy a whole host of ETF’s based around seasonal trading.

The evidence from the US bonds and equity markets looks compelling (see below), with June to September among the weakest months for equities but the strongest for bonds. Is this summer holiday related? Well, a quick check reveals these patterns do not exist in Australia, where children are actually at school from July to September. Going on holiday? Consider buying bonds.

Seasonal

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