Alpha Power Investing Newsletter

December 2, 2019

Stock Market Seasonality - A Global Phenomenon

A strong commitment to research has always been the backbone of the offerings from Alpha Investment Management. We place a strong emphasis on research because we recognize that the financial markets are not a one-way street, and that in order to succeed in the long-run an investor needs to identify factors that can give them a long-term investing "edge."

Jay Kaeppel, our Director of Research, has a long history of generating ground-breaking market ideas and strategies. As an author he has written four books on investing, most notably Seasonal Stock Market Trends: A Definitive Guide to Calendar-Based Stock Market Trading (Wiley). Over the years he has written many published articles in a variety of financial publications and magazines.

His most recent article was published in the November 2019 issue of Technical Analysis of Stocks and Commodities magazine and is titled Stock Market Seasonality: A Global Phenomenon. I invite you to read the article by clicking the following link:

The article deals with the stark and surprisingly consistent difference in stock market performance around the globe during one time of year versus the other. Another factor that is extremely important is the performance of U.S. stocks relative to the performance of international, global stock indexes. Figure 1 below displays the relative performance of the S&P 500 Index versus the MSCI EAFE Index (a broad international index comprised of over 900 stocks from developed countries around the globe) since 1971. The key thing to note is the cyclical "back and forth" nature of this relationship. Historically, just when one index appears to hold an "obvious" edge, things then swing back the other way. In other words, just when it becomes "obvious" that U.S. stocks are "better" than international stocks - or vice versa - the trend reverses in the other direction.

As you can see in Figure 1, the U.S. stock market has clearly outperformed the rest of the world in recent years. In fact, it can be argued that popularity of buying and holding a U.S. index fund such as one tracking the S&P 500 is likely at an all-time high. Yet the reality is that both of these trends should give investors pause. Because nothing lasts forever in the financial markets. No bull market, no performance for one asset class over another, etc.

We do not possess the ability to predict with any certainty when the investment landscape will change. But as serious students of stock market history - and investor psychology - we can predict with a great deal of certainty that the investment landscape will change. And when it does, that vast majority of investors will be taken completely by surprise. Which is why we are strongly encouraging investors to begin to plan ahead now.

In the near-term the current bull market may well continue to run and the U.S. stock market may continue to lead. But given the current level of market valuations, history strongly suggests that the next bear market "will be one of the painful kind." Because Alpha's strategies are designed to be "all-weather" strategies - i.e., that can make money in a bull market, but which can also hold up well and potentially make money even in a bear market, while typically experiencing lower volatility than that of a buy-and-hold approach - they are an excellent choice for investors in the years ahead.

Likewise, we believe that the launch of our new newest strategy - the Alpha International Power Index Strategy - will ultimately prove to be well-timed and we strongly urge investors to consider broadening their horizons beyond just the shores of the U.S.

Jerry Minton, Ph.D.
Alpha Investment Management, Inc.

Disclosures and Disclaimers: Past performance is not a guarantee of future performance. The returns illustrated in the chart above does not represent actual trading and are not representative of the returns of any strategy. The illustration is designed to quantify the effect of certain time periods (as specified) on the S&P 500 Index and the MSCI EAFE Index. Indexes are not investment vehicles and persons cannot invest directly in an index. Index funds/ETFs may vary somewhat from index returns due to management fees and portfolio structure. The data used to construct the illustration was obtained from a third-party source. While Alpha believes the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.

The information contained herein does not constitute and should not be construed as investment advice, an offering of investment advisory services, or an offer to sell or a solicitation to buy any security. Before investing in any fund and/or strategy, investors should consider the investment objectives, risks, charges and expenses of the fund/strategy and its investment options.  

Alpha Investment Management, Inc. is a SEC registered investment advisor located in the State of Ohio. Such registration does not imply a certain skill or training and no inference to the contrary should be made. The information and opinions expressed in this document are for informational purposes only. Any recommendation or opinion made in this document may not be suitable for all investors. The information contained herein does not constitute and should not be construed as investment advice, an offering of investment advisory services, or an offer to sell or a solicitation to buy any security.  

Alpha Power Investing Newsletter Archives

© 2019 Alpha Investment Management, Inc.